A master budget summarizes the future business plans of a company translated in financial numbers.
The business plans include sales, production, distribution, and finance activities of the company. The said activities are quantified and expressed in form of forecasted financial statements and supporting schedules. The supporting schedules provide the information that is too highly detailed to appear in the actual financial statements.
Thus, the master budget is a periodic business plan that includes a coordinated set of detailed operating schedules and financial statements. Its includes forecasts of sales, expenses, cashflow and balance sheets.
The master budget consists of 3 major components:
1. Operating budget.
3. Capital Budget.
