7.9: Budgeted Income Statement

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The sales, cost of goods sold, and selling and administrative cost budgets are supporting budgets that are combined to produce a budgeted income statement for the year. The budgeted income statements for both companies follow.

**Souvenir Statues**
**Budgeted Income Statement**
Sales		$600,000
Cost of goods sold	-	162,900
Gross profit	=	$437,100
Total selling and administrative expenses	-	147,100
Income before taxes	=	$290,000
Income taxes	-	58,000
Net income	=	$232,000

**Headgear**
**Budgeted Income Statement**
Sales		$754,000
Cost of goods sold	-	263,540
Gross profit	=	$490,460
Total selling and administrative expenses	-	228,100
Income before taxes	=	$262,360
Income taxes	-	65,590
Net income	=	$196,770

The operating budgets culminate with the budgeted income statement.

Additional budgets may be prepared that relate to balance sheet accounts. Financial budgets look at critical aspects of a business that are not directly operational but that impact a company’s ability to pay its obligations. The discussion will be limited to the cash budget and the capital expenditures budget.

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