Question

Which of the following budgets is a major part of the master budget and focuses on the income statement and its supporting schedules?

1) Operating budget
2) Capital budget
3) Cash budget
4) Sales budget

Answer 1

The operating budget is part of the master budget that concentrates on projecting the company's income, expenses, and profits, depicting the financial activity related to the company's day-to-day operations.

Step-by-step explanation:

The operating budget is a major part of the master budget that focuses on the income statement and its supporting schedules. It includes various components such as the sales budget, cost of goods sold budget, selling and administrative budget, and might include a budgeted income statement. The primary goal of the operating budget is to lay out a company’s projected income, expenses, and profit. It enables businesses to ensure they have sufficient revenue to fund their operational expenses and to plan for profits.