Managerial Accounting: Preparing a 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 report has depicted several aspects of preparing a master budget. The initial discussions
include considering various elements in preparing master budget. This discourse is followed by
identifying the differences of top-down and bottom-up approach in the budget process and
relate the same with Brisbane-based mining and mineral resource explorer ActivEX Limited. The
overall discussions of the study will identify various types of changes pertaining to projections
within the budget of the company. The final section of the report has considered the
differences observed between the budgeted income statement prepared for the year 2019 and
actual budgeted income of 2018. The several types of assertions have stated about the
rationale for such difference. The findings show that the different elements in the master
budget is considered to be essential in managing the manufacturing and sales activities for
accompanying the profitability and cash flow goals. Moreover, as ActivEX Limited deals with
large aggregate while estimation of specific segments in a budget. It is essential that such a
nature of budgeting estimate is taken under the responsibility of the top management for
estimating the budget requirements in the necessary segments. The top-down budget
approach will be appropriate in knowing about the day to day expenses considered during the
mining operations. Additionally, the assertions made from table 2 the projected income is
identified with increasing amount of expenses leading to cumulative the loss before income tax
from $ -6,48,677 in 2018 to $ -6,61,529 in 2019.

2MANAGERIAL ACCOUNTING
Table of Contents
Introduction....................................................................................................................... 3
a. Description of the elements in the Master Budget........................................................3
b. A discourse on comparison of top-down and bottom-up approach to the budget
process and reason for application of the same in chosen company............................................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
The learnings of the report have been seen with covering several aspects of preparing a
master budget. In the first section the discussions are relevant with considering various
elements of the master budget. The second segment of the study is evaluated on the
differences of top-down and bottom-up approach in the budget process and relate the same
with Brisbane-based mineral resource explorer ActivEX Limited. The overall discussions of the
study will identify various types of changes pertaining to projections within the budget of the
company. The initial study is considered the growth in sales projection with 10%. Subsequently,
the growth in cost of goods sold and be identified as 8%, along with growth in expenses of 2%.
The final section of the report has considered the differences observed between the budgeted
income statement prepared for the year 2019 and actual budgeted income of 2018. The several
types of assertions have stated about the rationale for such difference (Barr & McClellan, 2018).
a. Description of the elements in the Master Budget
The preparation of master budget begins with aggregating the budget produced in a
lower level hierarchy by consideration of various types of functional areas such as finance plan,
cash forecast and budgeted financial statement. The different elements in the master budget is
considered to be essential in managing the manufacturing and sales activities for accompanying
the profitability and cash flow goals. The preparation of a master budget should be based on a
careful coordination of smaller budgets thereby covering all segments of an organisation so
that it is able to provide a realistic information (Zietlow et al., 2018).
In general, the segregation of master budget can be done with either monthly or
quarterly basis in a financial year. The explanation of master budget can be identified with