What is the sequence of steps used in preparing the master budget?
A)Output from operating budgets is used to prepare the financial budgets.
B)Output from financial budgets is used to prepare the operating budgets.
C)Operating and financial budgets are prepared independently at the beginning of the budgeting process.
D)Operating and financial budgets are prepared independently at the end of the budgeting process.

Question

Quizplus · Accepted Answer

The master budget is prepared by first preparing operating budgets such as sales, production, materials, labor, and overhead budgets. The output from these budgets is then used to prepare financial budgets such as cash, capital expenditure, and pro forma financial statements. Therefore, option A is correct. Options B, C, and D are incorrect as they suggest either financial budgets are prepared first or independent of operating budgets.

What Is the Sequence of Steps Used in Preparing the Master