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9.9: Budgeted Balance Sheet

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Learning Outcomes

  • Create a budgeted balance sheet

Ok, one more piece of our puzzle to finish up! The balance sheet gives us a snapshot in time. In this case, a snapshot in our budgeted time. There are lots of pieces of the puzzle, so let’s take a few minutes to review:

Thumbnail for the embedded element "2200.60 Master Budget 6 Budgeted Balance Sheet"

A YouTube element has been excluded from this version of the text. You can view it online here: http://pb.libretexts.org/afm-2/?p=402

One more reminder: assets=liabilities+stockholder's equity

This accounting equation may come in handy as we work through this process.

If sales, costs and expenses all follow the budget, here is what our year end balance sheet will look like!

Hupana Running Company Budgeted Balance Sheet
Assets
Current Assets    
Cash $112,275  
Raw Materials Inventory $1,000  
Finished Goods Inventory $3,825  
Total Current Assets   $117,050
     
Plant and Equipment    
Land $25,000  
Buildings and Equipment $50,000  
Accumulated Depreciation $(4,000)  
Plant and Equipment, Net   $71,000
Total Assets   $188,050
     
Liabilities and Owner’s Equity
Current Liabilities    
Accounts payable $ –  
   
Stockholder’s Equity    
Common stock $50,000  
Retained earning $138,050  
Total stockholder’s equity   $188,050
Total liabilities and stockholder’s equity   $188,050
Note: We made some beginning balance assumptions here: the land and buildings were already there, along with the stock and a beginning retained earnings of $31,050.

So overall, Hupana Running Company is in great shape if the budget goes as planned. But, budgets don’t always go as planned, so having a cash cushion is a great thing! They could have reduced sales, or price reductions and still be ok. They did a great job of creating a cushion, where if things happen, they will still be fine.

Most businesses make some changes during the year to the budget. The budget is a guide, and must be considered a fluid document, that can be changed as new information or situations occur.

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