The master budget

- The master budget is the most detailed…and most heavily used budget in an organization.…This budget is an integrated group of detailed budgets…that together constitute the overall operating,…investing and financing plans for a specific time period.…The flow of the preparation of the individual budgets…within this master budget network works like this.…First, the budgeting process should be based…on the long-term strategic goals and plans of the company.…In fact, if there is no connection…between the company's long-term strategic plans…and the company's detailed budgets,…then the long-term strategic plans are irrelevant.…

Another maybe more positive way to say that same thing…is that the detailed budgets within the master budget…give relevance to the company's long-term strategic goals.…Now in a manufacturing firm,…the master budget begins with a forecast of sales.…The sales forecast, in connection…with the long-term strategic plan,…leads to the capital budget…or the plan for the purchase of long-terms assets.…