Mastering Managerial Accounting: Elements of a Master Budget, Budgeting Approaches, and Analysis of Budget Projections

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

1MANAGERIAL ACCOUNTING
Executive Summary
The discourse of the report has covered the elements in present in a master budget. It has also
included discussion about the comparison of top-down and bottom-up approach to the budget
process. In addition to this, the study covered analysis of the budget for Abundant Produce
which will be based on several types of changes in budget projections. This will begin with sales
projection with a growth of 10%. In addition to this, the cost of goods sold will be considered
with a growth of 8% and the expenses forecasted with a growth of 2%. The latter part of the
study has included a relevant projection of opinion on the comparison of Budgeted Income
Statement and actual statement. The main elements of master budget are identified with “Cash
budget”, “Direct labour budget”, “Direct materials budget” and “Ending finished goods
budget”. The top-down approach of budgeting involves setting the spending limits at high level
of aggregation like total spending for the company as a whole and each line item of the
expenses included in the accounting hierarchy. On the other hand, bottom-up method requires
individual departments and reporting units to prepare their personal is spending wish list which
is segregated as per line item of expenses. As per the computation of Budgeted income
statement of 2018 for Abundant Resource the increase in revenue, cost of goods sold and
expenses has led to increase in the net comprehensive loss for the year.

2MANAGERIAL ACCOUNTING
Table of Contents
Introduction....................................................................................................................... 3
a. Explanation of the elements in Master Budget..............................................................3
b. A discussion about the comparison of top-down and bottom-up approach to the
budget process and rational for the chosen company...................................................................7
c. Budgeted income statement 2019.................................................................................9
d. Opinion on the comparison of Budgeted Income Statement and actual statement....11
Conclusion........................................................................................................................14
References....................................................................................................................... 16

3MANAGERIAL ACCOUNTING
Introduction
The main aspects of the study have covered the elements in present in a master budget.
The second section has covered discussion about the comparison of top-down and bottom-up
approach to the budget process. In addition to this, the study has been also seen to include the
analysis of the budget for Abundant Produce which will be based on several types of changes in
budget projections. This will begin with sales projection with a growth of 10%. In addition to
this, the cost of goods sold will be considered with a growth of 8% and the expenses forecasted
with a growth of 2%. The latter part of the study has included a relevant projection of opinion
on the comparison of Budgeted Income Statement and actual statement (Shcherbina &
Tamulevičienė, 2016).
a. Explanation of the elements in Master Budget
Master budget is identified as the aggregation of budget produced in lower level with
consideration of different types of functional areas such as budgeted financial statement, cash
forecast and financing plan. It is a plan to manage the company’s sales and manufacturing
activities for meeting cash flow and profit goals. In order to create a master budget, there
needs to be a careful coordination of smaller budgets covering all parts of the organisation so
that the master budget is able to provide a realistic but not complacent result (Kalra et al.,
2015).
The typical elements of a master budget may be segregated into either quarterly or
monthly format which encompasses the entire fiscal year. The overall explanation of master
budget can be seen with assisting specific goals to achieve management actions and explaining
the strategic direction of the company. In addition to this, it may also include a discussion