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Preparing, Managing and Controlling the Master Budget
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Preparing, Managing and Controlling the Master Budget

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  • Consequently, it is very useful to also construct a budgeted balance sheet; this document is more difficult to create, requiring a number of additional calculations. Despite these difficulties, the balance sheet can provide useful indicators of whether there are problems with the assumptions used to construct the budget.
  • Consequently, it is very useful to also construct a budgeted balance sheet; this document is more difficult to create, requiring a number of additional calculations. Despite these difficulties, the balance sheet can provide useful indicators of whether there are problems with the assumptions used to construct the budget.
  • Consequently, it is very useful to also construct a budgeted balance sheet; this document is more difficult to create, requiring a number of additional calculations. Despite these difficulties, the balance sheet can provide useful indicators of whether there are problems with the assumptions used to construct the budget.
  • Transcript

    • 1. Preparing & Controlling The Annual Budget Preparing & Controlling The Annual Budget - Session FOUR - - Session FOUR -
    • 2. OutlineSection PageDefinition of the Master Budget 3Components of the Master Budget 4Components of the Budgeted Balance Sheet 8Account Receivable 9Inventory Account 13Fixed Assets Account 17Account Payable 21Additional Components of the Budgeted Balance Sheet 25Testing the Budgeted Balance Sheet 26Cash Impact on the Budgeted Balance Sheet 30The Financing Budget 31Case Study 1 – Sample Balance Sheet _ Master Budget 36Case Study 2 – Sample Statement of Income _ Master Budget 39Conclusion 52
    • 3. Components of the Budgeted Balance SheetComponents of the Budgeted Balance SheetThe key elements of the balance sheet that require estimationare: Accounts receivable Accounts Inventory payable Fixed assets
    • 4. Additional Components of the Budgeted Balance SheetComponents of the Budgeted Balance Sheet – AdditionalElementsThere are a few other line items in the balance sheet thatrequire estimation for the budget period. These items areusually adjusted manually, rather than through the use ofany formulas. They are: Prepaid expenses Equity Other assets Income taxes Notes payable payable Accrued liabilities
    • 5. Cash Impact on the Budgeted Balance Sheet Turnover Table Type of Turnover Cash Impact Caused ByAcc. Receivable More aggressive collection activity, Cash increasesturnover - Increase tighter credit policyAcc. Receivable Less collection activity, looser credit Cash decreasesturnover - decrease policy Reduce safety stock levels, use just-in-Inventory turnover – Cash increases time deliveries, reduce number ofIncrease product optionsInventory turnover – Increase safety stock elvels, engage in Cash decreasesDecrease bulk purchases Pay suppliers quicker, take earlyAcc. Payable turnover Cash decreases payment discounts, use suppliers wth- Increase shorter payment terms Pay suppliers more slowly, stop takingAcc. Payable turnover Cash increases early payment discounts, use suppliers- Decrease with longer payment terms
    • 6. The Financing Budget (2/5)The Financing BudgetThis budget addresses Obtain a loanthe need of a businessfor more cash. You can construct a financingbudget that addresses Sell stockthis need in two ways:
    • 7. The Financing Budget (3/5)The Financing Budget Cost reduction Discretionary items Other Financing Dividends Solutions Sales growth Sell assets
    • 8. Case Study 1 –Sample Balance Sheet - Master Budget
    • 9. Case Study 2 –Sample Statement of Income - Master Budget
    • 10. ConclusionIn a smaller business, the key component of the masterbudget is the budgeted income statement.However, this simple version of the master budget lacks acomparison to the financial position of the business duringthe budget period. You need this additional information toascertain whether the company has the financial resourcesto support the level of business activity shown in thebudgeted income statement.
    • 11. Thank You For Coming Today! Facilitator: Antoine TabbakhTel: +961 1 385 825 / website: www.bsf-lb.com Email: info@bsf-lb.com/BestSolutionFinance Company/bsf #bsfbeirut

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