Within accounting and budgeting practices, articulation refers to how values from different...

Question

Within accounting and budgeting practices, articulation refers to how values from different schedules and/or statements relate to one another.

During the Master Budgeting process, certain values may articulate within a given schedule or budget and certain other values may articulate to other schedules or subsidiary budgets altogether.

Describe five instances during the creation of a Master Budget wherearticulation takes place.

I WANT TO KNOW ABOUT AND KNOW THAT YOU KNOW ABOUT ARTICULATION. ARTICULATION IS NOT DEFINED IN YOUR TEXTBUT IT ISDEMONSTRATEDTHROUGHOUT THE CHAPTER. ARTICULATION IS THE FLOW OF DATA AMONG VARIOUS SCHEDULES AND STATEMENTS CREATED DURING THE BUDGETING PROCESS AND THE FLOW OF DATA BETWEEN THE INCOME STATEMENT AND THE BALANCE SHEET. DON'TTELL ME ABOUT THE BUDGETING PROCESS. DON'TTELL ME HOW TO CREATE A BUDGET. TELL ME ABOUT WHAT HAPPENS DURING THE PROCESS.

minimum 100 words per question

Kushal · Accepted Answer

Master budget is an aggregation of all the lower level budgets like sales, production, overheads, selling and administrative expenses budget.
Based on the forecasted master budget company can forecasts the estimates of the inventory that will be sold, how much needs to be produced, how much and when the raw materials need to be ordered, at what rate the firm should produce the finished goods. Based on this pro-forma income statement, balance sheet and cash flow statements can be prepared.
All the three financial statements are interlinked and we can understand the flow of each of the budgets and its impact on each of the financial statements.
Instances of articulation in the Master Budget –
1. The sales budget is a primary component of a master budget. Other components of master budget depend on this and it can be a direct or an indirect relationship. Therefore, the sales forecasting and planning should be done with utmost care so as to ensure the correctness of the master budget as a whole. For an instance, its need in the production budget is depicted as follows-
Planned Production =Expected Sales + Planned Ending Inventory – Beginning Inventory
Both the sales and the production budget are a operational budget.
	 
	Quarter
	 
	(in units)
	1
	2
	3
	4
	Year
	Expected Sales
	1000
	1100
	1200
	1300
	4600
	Ending Inventory Planned
	500
	700
	700
	800
	2700
	Beginning Inventory
	200
	250
	150
	35
	635
	Planned Production
	1300
	1550
	1750
	2065
	6665
2. The production budget is further used in direct material purchases budget. Like production budget, direct material purchases budget is also a part of operational budget. The production budget is used in calculating the Direct Material used in Production process. The following is the calculation for the Budgeted Direct Material Purchases:

Within accounting and budgeting practices, articulation refers to how values from different schedules and/or statements relate to one another. During the Master Budgeting process, certain values may...

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