Question

    There is one budget which is prepared as a consolidated

    summary of all the functional budgets. Identify it among the following: Refer to the following information to answer the next 4 questions (Q 23 to Q 26) A budget is a financial blueprint that plays a fundamental role in the strategic management of finances for individuals, businesses, and governments. It serves as a comprehensive plan, projecting anticipated income and allocating funds to various expenses over a specific period, typically a fiscal year. The primary objectives of a budget are multi-faceted. It serves as a planning tool, enabling the establishment of financial goals and the systematic allocation of resources to meet these objectives. Moreover, budgets provide a framework for financial control by allowing individuals and organizations to compare actual financial performance against the budgeted figures, facilitating adjustments and corrective measures as needed. Beyond control and planning, budgets foster financial accountability and transparency. They create a structured approach to financial decision-making, aligning expenditures with priorities and strategic objectives. A well-constructed budget encourages financial discipline by setting clear expectations and promoting responsible resource management. It also serves as a communication tool, ensuring that stakeholders within an organization are on the same page regarding financial expectations and constraints. Furthermore, budgets contribute to emergency preparedness by allocating funds for unforeseen circumstances, thereby enhancing financial resilience. They facilitate goal alignment, directing financial resources toward achieving specific targets, whether it be saving for a major purchase, reducing debt, or investing in growth opportunities. In addition, budgets support effective debt management by incorporating debt repayment into the financial plan. They also play a crucial role in performance evaluation, allowing for regular assessments of financial results and the adjustment of strategies and goals accordingly.
    A Flexible Budget Correct Answer Incorrect Answer
    B Fixed Budget Correct Answer Incorrect Answer
    C Functional Budget Correct Answer Incorrect Answer
    D Budget Centre Correct Answer Incorrect Answer
    E Master Budget Correct Answer Incorrect Answer

    Solution

    Functional Budgets – is one which relates to a particular function of the business. Example, Sales Budget, Production Budget among others. MASTER BUDGET – when all the functional budgets have been prepared, these are summarised into a master budget. It is a consolidated summary of all the functional budgets. There are 2 parts of master budgets: o   Operating Budget – budgeted profit and loss account, and o   Financial Budget – Budgeted Balance Sheet

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