Master Budget Report: Context Ltd's Financial Performance Analysis

This report provides a comprehensive analysis of a master budget, focusing on Context Ltd, a company planning to start a new business. The report delves into appropriate budgetary targets, the creation of a master budget, and a comparison of actual expenditure and income. It examines various b...Read More

Master Budgets

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
3.1 Appropriate budgetary targets for
an organisation.......................................................................................................................1
3.2 Creation of a master budget .............................................................................................1
3.3 Comparison actual expenditure and income.....................................................................1
3.4 Budgetary monitoring processes......................................................................................2
CONCLUSION ...............................................................................................................................5
REFERENCES ...............................................................................................................................6

INTRODUCTION
In accounting term, the master budget is defined as an expensive business policy that
helps to figure out the estimated future production level, sales, purchases, total expenses incurred
and loans that are needed to be taken in order to complete project (Schoen, 2016). A budget
which articulates and incorporates all of an organization's separate budgets. In this report, quad
consultancy is selected whose client company is context Ltd which is planning to start new
business.
In this report, appropriate budgetary targets for
an organisation, steps needed to prepare master budgets, comparison of actual expenditure and
income to master budget. In addition, evaluation of budgetary monitoring processes
in an organisation is discussed.
TASK 1
3.1 Appropriate budgetary targets for
an organisation
There are number of budgets that must be prepared by manager of company in order to
effectively operate different function in profitable manner. Such as:
 Finished inventory budgets:
 Raw material inventory budgets:
 Trade payables budget:
 Trade Receivables Budget:
 Cash budget:
3.2 Creation of a master budget
 Prepare the sales budget.
 Prepare the finished goods stock budget and production budget.
 Prepare budgets of resources for production.
 Prepare the raw materials purchases budget in quantities.
3.3 Comparison actual expenditure and income.
The actual measure and expenses incurred to purchase raw material. Income is money
that flows to inside or payments that company receive. Expenditure is cash that flows away from
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company to make payments. Manager use to prepare budgets in advance considering each and
every activity so that overall expenses can be noticed and actual income from these activities can
be figure out.
3.4 Budgetary monitoring processes
Budget monitoring is essential in order to assure that perhaps the economic, functional
and investment plans created and accepted for execution are executed as part of the funding
procedures. It must involve reviewing a wide range of tasks to fully advise what action needs to
be taken when important differences are identified. If carried out continuously, carefully and
efficiently, data will be provided by the budget checking method which may contribute to
corrective action or efficiency enhancement.
Finished inventory budgets: Finished inventory budget products estimates the price of
stock or finished goods at the end of each budget cycle. This also involves the base quantity at
the end of each budget cycle of manufactured goods.
April May June July August September
Units Units Units Units Units Units
Opening Inventory 1 0 500 600 700 800 900
Add: Production 2 500 600 700 800 900 900
500 1100 1300 1500 1700 1800
Less: Sales 3 0 500 600 700 800 900
Closing Inventory 3 500 600 700 800 900 900
From the above, budget it has been determined that Finished Inventories Budget at the
end of 30th September 2019 was 900 units. In starting the opening stock at April was 0 and it
keep on increasing with the level of increasing production. In the month of September the
opening inventory was 900 unit and company produced 900 additional unit in entire month.
Company had made sales of 900 unit during month of September due to which the closing stock
for context Ltd was 900 units.
Raw material inventory budgets: In business world, the material or substance that is
used by management in producing the valuable goods (Kim, 2015). The inventory and material
budget is mainly regarded for manufacturing firm that involves identification of:
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 The quantity and importance of inventory products to be performed. The equilibrium of
the stock relies on how long it will take for vendors to obtain manufactured goods after
placing an order.
April May June July August September
Units Units Units Units Units Units
Opening Inventory 1 0 600 700 800 900 900
Add: Purchases 2 1100 700 800 900 900 900
1100 1300 1500 1700 1800 1800
Less: Production 4 500 600 700 800 900 900
Closing Inventory 3 600 700 800 900 900 900
The above table describe the raw Raw Material Inventories Budget for the 6 months
ending 30th September 2019 for context Ltd. In the starting month of April company made a
purchase of 1100 unit and make use of 500 unit in producing good. There is a respective demand
of company product throughout these month, due to which they keep on purchasing number of
units such as 700, 800, 900, 900, 900 in each consecutive months. In the month of September
opening stock of raw material was 900 unit and company made a purchase of more 900 units
because there is a good demand of product in the market. Management uses 900 unit in order to
produce valuable good of company and the remaining balance of closing inventory is 900 unit.
Trade payables budget: This budget allows to assess the quantity to be paid by the
company at the end of a particular era, probably a month, towards its trade payables (creditor).
Throughout this budget, the business includes information about the point to which the business
makes loan acquisitions, the speed by which payments are produced to providers, discounts
obtained from customers or trade payables (Fisher-Ari, Kavanagh and Martin, 2017).
April May June July August September
€ € € € € €
Opening Balance 1 0 44000 28000 32000 36000 36000
Add: Purchases 5 44000 28000 32000 36000 36000 36000
44000 72000 60000 68000 72000 72000
Less: Cash Paid 3 0 44000 28000 32000 36000 36000
Closing Balance 44000 28000 32000 36000 36000 36000
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The above table shows balance of trade payable for last 6 month of Context Ltd. In
month of April company make a credit purchase of 44000 and do not make any payment so the
closing balance for the month is 44000. During month of may they make more purchase of
28000 and make a payment of last month thus the remaining balance of company is 28000. This
process keeps on going, so company make purchase and pay balance of last month. Such as in
end of September company had a remaining balance to pay to its supplier is 36000 because
company make purchase of amount 36000.
Trade Receivables Budget: With the support of this budget company are able to predict
the total amount that is needed to be collected from its trade receivables at the end of specific
time period, for example within a month (Allen and Cervo, 2015).
April May June July August September
Units Units Units Units Units Units
Opening Inventory 0 500 600 700 800 900
Sales (100*units) 0 50000 60000 70000 80000 90000
cash received 0 0 50000 60000 70000 80000
Amount 0 50000 60000 70000 80000 90000
From the above budget, it has been determined that sales of company started from the
month of may and company sell 500 unit to customer on credit basis. The management of
Context Ltd decided to give only one month credit to buyer so that they is a proper flow of funds
in order to buy required raw material that are essential for production.
Cash budget: Is a budget that anticipated money payouts and disbursements over
the working life of company (Cash Budget, 2019). These cash outflows and inflows include
accumulated profits, expenditures paid, receipts and charges for credit.
April May June July August September
Inflows € € € € € €
Share Issue 3 3,00,000 0 0 0 0 0
Cash Received 3 0 0 50,000 60,000 70,000 80,000
3,00,000 0 50,000 60,000 70,000 80,000
Less: Outflows
Cash paid 3 0 44,000 28,000 32,000 36,000 36,000
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Direct Labor 6 10,000 12,000 14,000 16,000 18,000 18,000
Production
Overheads 7 17,000 17,000 17,000 17,000 17,000 17,000
Non-Production
Overheads 8 10,000 10,000 10,000 10,000 10,000 10,000
Non-Current Assets 3 2,50,000 0 0 0 0 0
2,87,000 83,000 69,000 75,000 81,000 81,000
Net
Inflows/(Outflows) 13,000 -83,000 -19,000 -15,000 -11,000 -1,000
balance Carried
Forward 9 13,000 -70,000 -89,000 -1,04,000 -1,15,000 -1,16,000
From the above table it has been determined that total inflows of context Ltd by issuing
share and cash received 560000 in respective months. The total outflow for company have
number of sub section such as cash paid, direct labour, production overhead, non production
overheads and non current assets. The total balance that is carried forward in respective month is
as follows in April it is 13000, may (70000), June (89000), July (104000), August (115000) and
September (116000).
CONCLUSION
From the above report, it has been concluded that budgets have very much important role
to play within an organisation, as it support to make proper prediction of total expenditure and
revenue of business during an accounting year. In order to analyse the entire expenses and
income of company manager use to prepare master budget, that is consider as the aggregation of
all lower level budgets prepare by company.
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REFERENCES
Books and Journals:
Allen, M. and Cervo, D., 2015. Multi-domain master data management: advanced MDM and
data governance in practice. Morgan Kaufmann.
Fisher-Ari, T., Kavanagh, K. M. and Martin, A., 2017. Sisyphean neoliberal reforms: The
intractable mythology of student growth and achievement master narratives within the
testing and TFA era. Journal of Education Policy. 32(3). pp.255-280.
Kim, H. J., 2015. Success in heading north?: South Korea's master plan for Arctic policy. Marine
Policy. 61. pp.264-272.
Schoen, D. E., 2016. Putin's Master Plan: To Destroy Europe, Divide NATO, and Restore
Russian Power and Global Influence. Encounter Books.
Online
Cash Budget. 2019. [Online] Available Through:
<https://businessjargons.com/cash-budget.html>
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