The budgeted income statement is part of which element of the master budget?

• A. Cash budget
• B. Operating budget
• C. Capital expenditures budget
• D. Financial budget

Answer: (B)

Verified step by step guidance

1. Understand the concept of a master budget: A master budget is a comprehensive financial planning document that includes various individual budgets, such as the operating budget, financial budget, and capital expenditures budget.
2. Learn about the budgeted income statement: The budgeted income statement is a projection of a company's revenues, expenses, and net income for a specific period. It is used to assess expected profitability.
3. Identify the components of the master budget: The master budget is typically divided into two main categories: the operating budget and the financial budget. The operating budget includes budgets related to day-to-day operations, such as sales, production, and expenses. The financial budget includes budgets related to cash flows, capital expenditures, and financing activities.
4. Determine the relationship between the budgeted income statement and the operating budget: The budgeted income statement is derived from the operating budget because it uses information from sales, production, and expense budgets to calculate projected revenues and expenses.
5. Conclude that the budgeted income statement is part of the operating budget, as it focuses on operational activities and profitability rather than cash flows or capital expenditures.