VCE · Accounting · Budgeting & Cash Flowlive from the app
Budgeted financial statements
Before a period starts, a trading business turns its plans into three budgeted reports. The budgeted Income Statement shows expected profit on an accrual basis, the budgeted Cash Flow Statement lists the cash it expects to receive and pay, and the budgeted Balance Sheet shows the assets, liabilities and owner's equity it expects at the end. Because revenue is earned before credit customers pay, a business can budget a healthy profit and still run short of cash.
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the one idea
why this one carries the topic.
A budget is a plan written in numbers. Comparing it to what actually happened is how a business learns anything.
An example surf shop's budgeted Income Statement, Balance Sheet and Cash Flow Statement for one quarter, drawn side by side with net profit linked to capital and closing cash linked to Cash at bank. Raise the share of credit sales or add one extra plan, and only the figures that truly depend on it move.
what examiners catch — A common slip is putting depreciation, or credit sales not yet collected, into the budgeted Cash Flow Statement. Receipts from customers are cash sales plus collections from accounts receivable; depreciation belongs only in the Income Statement. Classify interest paid as operating, and loans and drawings as financing.
what you leave with
five things, not forty.
The budgeted Cash Flow Statement lists expected cash receipts and payments, sorted into operating, investing and financing activities; depreciation is not a cash flow, so it never appears there.
The budgeted Income Statement records sales revenue when it is earned and subtracts cost of sales and expenses, including depreciation, to show expected net profit.
The budgeted Balance Sheet classifies expected assets and liabilities as current or non-current and shows owner's equity at the end of the period.
The reports connect: closing cash becomes Cash at bank, and net profit, less drawings, is added to capital in the Balance Sheet.
More sales on credit leaves revenue and profit unchanged but lowers cash receipts and raises accounts receivable.
what's underneath
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this conceptbudgeted financial statementsAn example surf shop's budgeted Income Statement, Balance Sheet and Cash Flow Statement for one quarter, drawn side by side with net profit linked to capital and closing cash linked to Cash at bank.
built on itvariance analysisbecause variance compares plan to actual
built on itoperating budgetsbecause Operating budgets feed the budgeted income statement and balance sheet.
the rest of budgeting & cash flow
4 more, same treatment.
Each one is its own knowscape in the app — built for how a particular student takes things in, not one explanation handed to everybody.
operating budgetsin the appcash flow forecastsin the appvariance analysisin the appwhy businesses budgetin the app
this is one of 865
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