1. Create a short personal (Not a business) budget for one month.

2. Provide the steps and thoroughly explain the master budget (Refer to screenshot for info)

The "budget" is not a single document. Rather, the master budget consists of a number of interrelated budgets that collectively summarize all the planned activities of the business. The elements of a master budget vary depending on the size and nature of the business. A typical master budget for a manufacturing company would include the following: 1. Operating budgets 2. Financial budgets a. Sales budget a. Budgeted income statement b. Production budgets including b. Budgeted balance sheet - Units to produce c. Budgeted cash flows statement 3 - Direct materials d. Capital expenditures budget - Direct labor - Overhead c. Cost of goods manufactured and sold budget d. Selling and administrative expense budget - Marketing - Administrative expenses - Research and development e. Cash budget Some elements of the master budget are organized by responsibility center. The budgeted income statement, for example, indicates the budgeted revenue and expenses of each profit center. The cash budget shows the budgeted cash flows for each cost center as well as each revenue center. The production schedule and manufacturing cost budget indicate the unit production and manufacturing costs budgeted for each production process. The portion of the budget relating to responsibility budgets are an important element of a responsibility accounting system. The many budgets and schedules making up the master budget are closely interrelated. Some of these relationships are illustrated in Exhibit 23-2 on the following page. Our discussion relates to two categories of budgets, operating and financial. Operating budgets are internal working budgets used by employees of the company. On the other hand, financial budget information is more externally focused and more likely to be shared with creditors, investors, customers, labor unions, and so forth. Exhibit 23-2 shows that operating and financial budgets are closely linked. As we discuss NTI's 2011 budgets, you will see specifically how the operating and financial budgets link together. To help you follow our discussion in the remainder of this chapter, operating or financial budget exhibits will have either a blue or green background, respectively, the same colors shown in Exhibit 23-2. STEPS IN PREPARING A MASTER BUDGET Some parts of the master budget should not be prepared until other parts have been completed. For example, the budgeted financial statements are not prepared until the sales, manufacturing, and operating expense budgets are available. This is the logical sequence of steps for preparing the annual elements of the master budget: 1. Prepare a sales forecast. The sales forecast is the starting point in the preparation of a master budget. This forecast is based on a business strategic plan, past experience, estimates of 3 The budgeted cash flows statement and capital expenditures budget are not covered in this chapter. The focus in this chapter is on operational budgets and their relationships to the budgeted income statement and balance sheet. Capital expenditures are discussed in Chapter 26 and budgeted cash flows statements are covered in more advanced accounting courses