II.

Let’s Perform and Practice

Shoes are Us
Budgeted Income Statement
For the Year End Dec. 31, 2021

Sales Revenue (1. P2,823.529412 x 850) 2,400,000

Less: Cost of Goods Sold (P1,500 x 800) 1. P1,200,000
Gross Profit 1,200,000
Less: Selling & Administrative Expenses 400,000
Operating Income 3. P 800,000
Less: Interest Expense 50,000
Income before Income Taxes 750,000
Less: Income Tax 50,000
Net Income 4. P 700,000

Shoes are Us
Budgeted Balance Sheet
December 31, 2021

Jan. 1 Dec. 31

7.
Cash 550,000 P980,000

Accounts Receivable 0 150,000

Allowance for Doubtful Accounts 25,000 (40,000)

Inventory 0 200,000

Machine and Equipment 75,000 20,000

Accumulated Depreciation (50,000) (10,000)

Total Assets P600,000 1,300,000

5.

Accounts Payable P100,000 P200,000

Line of Credit

Common Stock P200,000 600,000

6.

Retained Earnings 300,000 P500,000

8.
 Total Liability and Owner’s Equity P600,000 1,300,000

III. Let’s Connect and Analyze

1. What are the Five Major Steps in Preparing a Budget?
Step 1: Prepare a sales forecast or sales projection (sales budget)
Step 2: Determine production/Inventory volume
Step 3: Estimate selling and administrative expenses
Step 4: Compute for cash flow and other financial results (The Cash Budget)
Step 5: Compute for estimated financial statements (Budgeted Income Statement
Balance Sheet)

2. What are the 4 Elements of Operational Budget?

The Four Elements of Operational Budget
1. Sales Budget (some businesses sometimes call it as “Sales Forecast or Sales
Projection
2. Production budget
3. Selling and Administrative Expense Budget
4. Pro forma (Budgeted) Income Statement

3. What are three ways of making estimates for the Sales Budget?
The Three Ways of Making Estimates for the Sales Budget
1. Make a statistical forecast based on an analysis of general business conditions,
market conditions, product growth curves, etc.
2. Make an internal estimate by collecting the opinions of executives and sales
staff.
3. Analyze the various factors that affect sales revenue and then predict the future
behavior of each of those factors.
4. What are the Four Major Sections of Cash Budget?
There are four major sections of the Cash Budget:
1. The receipts section, which gives the beginning cash balance, cash collections from
customers, and other receipts.
2. The cash payments section, which shows all-cash purchases payments made.
3. The cash surplus or deficit section, which shows the difference between the cash
receipts section and the cash disbursements section.
4. The financing section, which provides a detailed account of the borrowings and
repayments expected during the budget period.

5. What are the Five Common Changes in the Budgeted Balance Sheet?
The Five Common Changes in the Budgeted Balance Sheet
Information Source Balance Sheet Change

Cash Balance cash ending balance from the cash budget

Accounts Receivable Balance receivables to be collected from the cash

collections schedule

Inventory inventory ending balance as shown from

calculations to create the income statement

Machinery & Equipment ending balance in the budget of capital

assets

Accounts Payable purchases unpaid from the cash payments

schedule

IV. Let’s Answer

1. The business uses a financial budget to:
c. Provide the business with better control and careful planning process.
2. Which of the following about financial budget preparation is true?
b. Create an operating budget before making a financial budget
3. Which of the following is a part of the finance budget?
a. cash budget
4. The most common budget is prepared for a ________.
d. year
5. Which of the operating budgets is prepared first?
a. sales budget
6. The fourth step in preparing a budget is?
d. determine cash flow and other financial effects.
7. Operational budget includes the following, except_______.
c. cash budget

V. Let’s Explore and Let’s Create

Company Name: PepsiCo
A. Sales Budget
B. Budgeted Balance Sheet

Sales Budget of Pepsi

 Budgeted Balance Sheet of Pepsi
Sources:
https://bit.ly/3msllST

https://bit.ly/2WLbMpo - P.8