Question

List the three key benefits companies get from preparing the budget. Understanding the components of master budget The following are some of the components included in the master budget.A Buderted balance sheet b. Sales budget G Capital expenditures budpet d. Budgrted income statement e Cash budget L. Inventory, purchases, and cost of goods sold budget Buderted statement of cash flows Requirement 1. List in order of preparation the items of the master budget.

Answer 1

A Budget is a formal plan of action which helps the organization in achieving its objectives.

Key benefits of budgeting:

• Helps in achieving efficiency and economy in various activities and operations of the company
• It helps in bringing divisional and departmental accountability and responsibility
• It helps in business planning and achieving strategic objectives
• It helps in Cost management through Cost control and Cost reduction
• It helps in performance evaluation of employees and is a source of motivation to achieve targets

Components of Master Budget in order:

• · Sales budget
• · Inventory
• · Purchases
• · Capital expenditures budget
• · Cash budget
• · Cost of goods sold budget
• · Budgeted income statement
• · Budgeted balance sheet
• · Budgeted statement of cash flows Requirement