IGNOU : M.COM : MCO 5 : UNIT 9 : Q - 4. What is a Master Budget ? What are its Components ?

Ans. MASTER BUDGET

Master Budget is a combination of all other budgets prepared for a specific period. It shows the overall budget plan. All the budgets are coordinated into one harmonious unit.

According to Rowland and William H. Harr, “Master Budget is a summary of the budget schedules in capsule form made for the purpose of presenting in one report the highlights of the budget forecast.” Thus, Master Budget sets out the plan of operations for all departments in considerable detail for the budget period. The budget may take the form of a Profit and Loss Account and a Balance Sheet as at the end of the budget period.

The budget generally contains details regarding sales (net), production costs, cash position, and key account balances like debtors, fixed assets, bills payable, etc. It also shows the gross and the net profits and the important accounting ratios. It is prepared by the Budget Officer and it requires the approval of the Budget Committee before it is put into operation. If approved, it is submitted to the Board of Directors for final approval. The Board may make certain alterations if necessary before it is finally approved.