Managerial Accounting: Elements of Master Budget and Budgeting Approaches

Running head: MANAGERIAL ACCOUNTING
Managerial Accounting
Name of the Student
Name of the University
Author’s Note

1MANAGERIAL ACCOUNTING
Executive Summary
The given study has covered the elements prevalent in a master budget and made a
comparison based on bottom-up and top-down approach of budgeting. The report has also
suggested the appropriate budgeting approach for Amani Gold. Some of the other sections of
the study has evaluated the income statement of Amani Gold. This is done by predicting several
changes in budget related to revenue, cost of consultancy and expenses. The overall findings
have revealed that the main components of master budget include an amalgamation of lower
level budget such as sales budget, capital budget, general and administrative expense budget,
direct material budget and directly labour budget. It has been further discussed that the
appropriate budgeting approach for Amani Gold is suggested with proceeding bottom-up
approach. This will allow the company to take budgeting cost estimates of individual items such
as consultancy cost, occupancy expenses, travel expenses and depreciation expenses. A
comparative study on the budgeted income statement of 2019 and actual income statement of
2018 shows that despite of significant increase in the revenue, the cost of goods sold and
expenses has only contributed to more loss. The projected changes are not favourable for the
company.

2MANAGERIAL ACCOUNTING
Table of Contents
Introduction....................................................................................................................... 3
a. Breaking down the main elements in Master Budget....................................................3
b. Comparison of top-down and bottom-up approach and applicable approach for
Amani Gold.................................................................................................................................... 8
c. Budgeted income statement 2019...............................................................................10
d. Opinion on the comparison of Budgeted Income Statement and actual statement....11
Conclusion........................................................................................................................14
References....................................................................................................................... 15

3MANAGERIAL ACCOUNTING
Introduction
Master budget acts as a documented strategy rulebook of expected future sales, capital
investment, purchases and production level which can be referred by a company for making
future predictions on decision making. Therefore, master budget can be identified as an
amalgamation of various types of other bodies such as sales budget, capital budget, general and
administrative expense budget, direct material budget and directly labour budget. The
discussions of the study have not only covered the elements prevalent in a master budget but
also discussed about the comparison based on bottom-up and top-down approach of
budgeting. Some of the other sections of the study has evaluated the income statement of
Amani Gold (listed in ASX) which conducts exploration on flagship projects such as Giro Gold
Project. The report has evaluated the income statement of the company based on several
changes in budget predictions related to revenue, cost of consultancy and expenses. The overall
projections in terms of revenue cost of consultancy and expenses has been identified with a
growth rate of 10%, 8% and 2% respectively. The study has also enumerated on comparison of
actual income and budgeted income of Amani Gold (Kuroki, Hirose and Motokawa 2018).
a. Breaking down the main elements in Master Budget
The general definition of master budget needs to be understood with combination of
lower level budget such as sales budget, capital budget, general and administrative expense
budget, direct material budget and directly labour budget. The presentation of such positive
information is typically published both quarterly or monthly and covers the full fiscal year of a
company. The conceptualisation of such a budgeting practice acts as a guide for the companies
to provide strategic direction for how such a budget will be conducive in accomplishing certain