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Why is the master budget prepared before the period begins? What is a pro forma cash flow statement in the master budget? What is the first budget prepared in the master budget and why? What is a budgeted income statement used for? How is the budgeted income statement prepared? How does the cash budget fit within the master budget? What is the cost of goods sold budget and how does it link inventory budgets? Why must the budgeted balance sheet balance, and what if it doesn't? What is the relationship between the master budget and responsibility accounting? How does the sales budget flow through to the budgeted balance sheet?
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Budgeting & Forecasting › The Master Budget

In what order are the components of the master budget prepared?

Intermediate

Answer

Typically: sales budget first, then production budget, then direct materials, direct labor, and overhead budgets, then the ending-inventory and cost-of-goods-sold budgets, then selling and administrative expense budget, giving the budgeted income statement; then the cash budget and capital budget, and finally the budgeted balance sheet. Each step feeds the next.
Real-world example Sales -> production -> materials/labor/overheads -> budgeted P&L -> cash -> budgeted balance sheet.

Common follow-ups: What is prepared first? | What is prepared last?

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All 34 The Master Budget questions