Budgeted Balance Sheet:
Definition and Explanation:
The budgeted balance sheet is developed by beginning with the current balance sheet and adjusting it for the data contained in other budgets.
Example | Sample of Budgeted Balance Sheet:
Following is the budgeted balance sheet of Hampton Freeze Inc. Some of the data on the budgeted balance sheet have been taken from the company’s previous end-of-year balance sheet for 2008 which appears below the budgeted balance sheet for 2009.
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Hampton Freeze Inc. |
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Assets |
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| Current assets: | |||
| Cash | 1 | $47,500 | |
| Accounts receivable | 2 | 120,000 | |
| Raw materials inventory | 3 | 4,500 | |
| Finished goods inventory | 4 | 39,000 | |
| ————- | |||
| Total current assets | $211,000 | ||
| Plant and equipment: | |||
| Land | 5 | 80,000 | |
| Building and equipment | 6 | 830,000 | |
| Accumulated depreciation | 7 | (392,000) | |
| ————– | |||
| Plant and equipment, net | $518,000 | ||
| ————– | |||
| Total assets | $729,000 | ||
| ======= | |||
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Liabilities and Stockholders’ Equity |
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| Current liabilities: | |||
| Accounts payable (raw materials) | 8 | $27,000 | |
| Stockholders’ equity: | |||
| Common stock, no par | 9 | $175,000 | |
| Retained earnings | 10 | 526,000 | |
| ————– | |||
| Total stock holders’ equity | 701,100 | ||
| ————– | |||
| Total liabilities and stockholders equity | $729,000 | ||
| ======= | |||
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Hampton Freeze, Inc. |
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Assets |
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| Current Assets: | ||
| Cash | $42,500 | |
| Accounts receivable | 90,000 | |
| Raw materials inventory (21,000 pounds) | 4,200 | |
| Finished goods inventory (2,000 cases) | 26,000 | |
| ————- | ||
| Total current assets | $162,700 | |
| Plant and Equipment: | ||
| Land | 80,000 | |
| Building and equipment | 700,000 | |
| Accumulated depreciation | (292,000) | |
| ————- | ||
| Plant and equipment, net | $488,000 | |
| ————- | ||
| Total assets | $650,700 | |
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Liabilities and Stockholders’ Equity |
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| Current Liabilities: | ||
| Accounts payable (raw materials) | $25,800 | |
| Stockholders’ Equity: | ||
| Common stock, no par | $175,000 | |
| Retained earnings | 449,900 | |
| ————- | ||
| Total stock holders’ equity | 624,000 | |
| ————- | ||
| Total liabilities and stockholders’ equity | $650,700 | |
| ======= | ||
Explanation of December 31, 2009, budgeted balance sheet figures:
- The ending cash balance, as projected by the cash budget on cash budget page.
- Thirty percent of fourth quarter sales, from sales budget ($400,000 × 30% = $120,000)
- From direct materials budget, ending raw materials inventory will be 22,500 pounds. This material costs $0.20 per pound. Therefore, the ending inventory in dollars will be 22,500 pounds × $0.20 = $4,500.
- From ending finished goods inventory budget.
- From December 2008 balance sheet (no change).
- The December 2008 balance sheet indicated a balance of $700,000. During 2009, $130,000 of additional equipment will be purchased (see cash budget), bringing the December 31, 2009, balance to $830,000.
- The December 31, 2008 balance sheet indicated a balance of $292,000. During 2009, $100,000 depreciation will be taken ($60,000 from manufacturing overhead budget, and $40,000 selling and administrative expense budget), bringing the December 2009, balance to $392,000.
- One half of the fourth quarter raw materials purchase, from direct materials budget.
- From the December 2008 balance sheet (no change).
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10. |
December 31, 2008, balance | $449,900 |
| Add net income, from budgeted income statement | 108,200 | |
| ——- | ||
| 558,100 | ||
| Deduct dividend paid from cash budget | 32,000 | |
| ——- | ||
| December 31, 2009, balance | $526,100 | |
| ====== |
You may also be interested in other articles from “Budgeting and planning” chapter:
- Profit Planning
- Participative or Self Imposed budgeting
- Human Factors in Budgeting
- Zero Based Budgeting (ZBB)
- Budget Committee
- Master Budget
- Sales Budget
- Production Budget
- Inventory Purchases Budget for a Merchandising Firm
- Material Budgeting | Direct Materials Budget
- Labor Budget
- Manufacturing Overhead Budget
- Ending Finished Goods Inventory Budget
- Selling and Administrative Expense Budget
- Cash Budget
- Budgeted Income Statement
- Budgeted Balance Sheet
- International Aspects of Budgeting
Jennifer edwards