Managerial Accounting: Master Budget, Budgeting Approaches, and Case Study Analysis

Running head: MANAGERIAL ACCOUNTING
Managerial Accounting
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Executive Summary:
The report has covered a brief description of the different elements included in a master
budget. The second segment has focused on comparing the top-down and bottom-up approach
of budgeting and accordingly, recommendations need to be provided regarding the suitability
of one particular approach for an ASX listed organisation. The income statement of Ausquest
Limited is taken into consideration for preparing the budgeted income statement so that the
cash inflows generated could be used for covering up the estimated cash outflows. By enforcing
appropriate marketing strategies, it would become easy for Ausquest Limited in achieving the
budgeted income by increasing the overall demand for its products in the market. Moreover, it
has been analysed that the successful organisations follow the top-down budgeting approach,
as it is a suitable communication tool for communicating messages to the staffs so that they
could perform accordingly. Therefore, this approach would be suitable for Ausquest Limited so
that it could conduct its business operations effectively.

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Table of Contents
Introduction:.................................................................................................................................. 3
Requirement a:.............................................................................................................................. 4
Requirement b:............................................................................................................................14
Requirement c:............................................................................................................................ 18
Requirement d:............................................................................................................................19
Conclusion:.................................................................................................................................. 20
References:.................................................................................................................................. 22

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Introduction:
Managerial accounting includes the procedures for creating reports and documents,
which would assist the management in undertaking decisions for ensuring smooth business
operations. From the perspective of the managers, it helps in identifying whether any project or
department is performing well up to the desired expectations (Alsharari, Dixon and Youssef
2015). The master budget is an aspect of managerial accounting, which is the aggregation of all
lower-level budgets produced by the different functional areas of an organisation and it takes
into consideration the budgeted financial statements, financing plan and cash forecast.
The report intends to cover a brief description of the different elements included in a
master budget. The second segment would focus on comparing the top-down and bottom-up
approach of budgeting and accordingly, recommendations need to be provided regarding the
suitability of one particular approach for an ASX listed organisation. For meeting this purpose,
Ausquest Limited is taken into consideration, which is involved in exploring and evaluating
mineral resources in Australia and Peru. The organisation explores for a group of minerals like
copper, iron oxide, zinc, gold, base metal deposits and others (Ausquest.com.au 2019).
Moreover, the third segment would involve the preparation of the budgeted income statement
of the organisation for 2019 based on the data of the income statement in 2018. Finally, the
report would emphasise on providing opinion regarding the changes in financial performance in
the year 2019.

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Requirement a:
Master budget could be defined as the strategic plan of management for the future of
the organisation (Beattie 2014). All aspects of business operations are charted and they are
documented for future estimations. Thus, with the help of master budget, the management of
an organisation could coordinate the activities related to sales, production, purchasing and
other divisions to monitor business progress along with undertaking corrective measures, if
needed. The budget is prepared annually and it is reviewed generally in each month. More
precisely, all business aspects are represented in this document. The master budget contains a
group of elements, which are elucidated briefly as follows:
Figure 1: Elements of the master budget

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(Source: Carlsson-Wall, Kraus and Lind 2015)
Sales budget:
A sales budget projects the selling volume in units and the projected earnings from the
sale of such units. A sales budget is often segregated into first, second, third and fourth quarter
estimates. The crucial components of a sales budget include projected unit sales, price per unit
and allowance for returns and discounts. The budgeted gross sales are computed by multiplying
the estimated sales per unit with the selling price per unit. For computing the budgeted net
sales, the projected sales returns and discounts are deducted from budgeted gross sales
(Boučková 2015). For preparing a sales budget, it is necessary to consider the existing economic
conditions and production capacity specific to the business. In addition, it is essential to confer
with sales staffs at different levels in various positions.
Table 1: Sales budget format
(Source: Langfield-Smith et al. 2017)
Production budget: