Page 305 - F2 - MA Integrated Workbook STUDENT 2018-19

Budgeting

Functional budgets

5.1 Functional budgets and the master budget

A number of functional budgets will be prepared and these will be pulled together into
the master budget which is a summary of all the functional budgets. It usually
comprises the budgeted statement of profit or loss, budgeted statement of financial
position and budgeted cash flow statement (cash budget).

5.2 Sales budgets

For most organisations, the principal budget factor is usually sales volume.

The sales budget is therefore the primary budget from which the majority of other
budgets are derived.

The sales budget = sales volume × selling price

5.3 Production budgets and inventory adjustment

Budgeted production = forecast sales + closing inventory – opening
inventory

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