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How do you build the master budget for a service organization versus a manufacturer? How does the master budget support scenario and sensitivity analysis? How do you incorporate financing and dividends into the master budget? How do you validate/sense-check a completed master budget? How do you model working capital changes in the master budget? How do you flex or revise the master budget during the year? How do you build a master budget model that recalculates automatically? How does the master budget reflect a change in credit terms offered to customers?
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How does the capital budget integrate into the master budget?

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Answer

The capital budget provides planned asset purchases: their cash cost enters the cash budget in the payment period, the assets increase non-current assets on the budgeted balance sheet, and the resulting depreciation flows into the income statement and reduces asset value over time. Any financing raised for capex also flows through cash and the balance sheet.
Real-world example A budgeted machine purchase adds to assets, drains cash when paid, and adds depreciation to future profits.

Common follow-ups: Where does the capex cash cost appear? | How does capex affect future profit?

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All 34 The Master Budget questions