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In what order are the components of the master budget prepared? 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? What is the relationship between the master budget and responsibility accounting? How does the sales budget flow through to the budgeted balance sheet? What is the difference between the operating cycle and the master budget? How is depreciation handled across the master budget statements? What is the link between budgeted contribution and the master budget? What is the budgeted cost of goods manufactured?
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Why must the budgeted balance sheet balance, and what if it doesn't?

Intermediate

Answer

It must balance because it's built on double entry—every budgeted transaction has equal effects, so assets should equal liabilities plus equity. If it doesn't balance, there's an error or omission in the supporting budgets (e.g., a cash flow, profit, or financing item mishandled). The imbalance signals the model needs checking before the budget is finalized.
Real-world example A budgeted balance sheet that won't balance reveals a missed dividend payment in the cash budget.

Common follow-ups: What does an imbalance indicate? | Why should it balance in principle?

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All 34 The Master Budget questions