- 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:
One more reminder:
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|
|Raw Materials Inventory||$1,000|
|Finished Goods Inventory||$3,825|
|Total Current Assets||$117,050|
|Plant and Equipment|
|Buildings and Equipment||$50,000|
|Plant and Equipment, Net||$71,000|
|Liabilities and Owner’s Equity|
|Accounts payable||$ –|
|Total stockholder’s equity||$188,050|
|Total liabilities and stockholder’s equity||$188,050|
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.
- Budgeted Balance Sheet. Authored by: Freedom Learning Group. Provided by: Lumen Learning. License: CC BY: Attribution
- 2200.60 Master Budget 6 Budgeted Balance Sheet. Authored by: Accounting Instruction, Help, & How To. Located at: https://youtu.be/Ze7eaigfsZs. License: All Rights Reserved. License Terms: Standard YouTube License