Running head: BUDGETED INCOME STATEMENT
Budgeted Income Statement
Christopher D. Holes
Bellevue University
FBUS 345
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BUDGETED INCOME STATEMENT
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Abstract
Preparing financial statements requires attention to detail that will allow the reader to easily read
and comprehend a significant amount of information. Budgets create a way for users to compare
expectations to results. When using budgeted income statements, these provide the same data as
a typical income statement, with the exception of the information being budgeted rather than
historical. This information can be utilized to assess if changes to the budget will need to be
executed.
Keywords: budgeted income statement, budgeting, profits, assets, revenues
BUDGETED INCOME STATEMENT
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Budgeted Income Statement
The Vice-President of Sales has predicted a half percent increase in sales for the coming
year. Also increasing will be the cost of raw materials, by 3.75% according to the VP of
Purchasing. Depreciation will decrease by ten percent over the coming year, and deferred taxes
will decrease by 15% from the previous year. Dividends paid to common stock holders will be
reduced by ten percent from the amount paid the previous year.
Questions
1. The budgeted income statement indicates a negative change to the Gross Profits for
2013. This change was -.3%, as a result of the rise of the cost of production being
more than revenues.
2. The budgeted income statement indicates changes in net operating income for 2013.
The statement shows a .75% increase due to the decision to cut more expenses, such
as reducing dividends.
3. Changes in net income shown on the budgeted income statement for 2013 was a 1%
increase achieved by lowering expenses and achieving more revenue for the year.
4. The earnings per share in the 2013 budgeted income statement was $3.35 which was
a 1.2% increase from the previous year.
5. According to the budgeted income statement, the retained earnings were $235.33
thousand dollars which shows an increase of $15.33 thousand dollars.
6. There are several external factors to consider when preparing a budget or forecast.
First, taxes can play a very large role in the fluctuations that can occur in a company’s
budget. Second, the economy can influence an organization’s budget in a large way,
including price per product and supply and demand. Last, technological advances can
BUDGETED INCOME STATEMENT
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be important factors in the effectiveness of your budget; when new products are
introduced that reduce or enhance your own products this can lead to a need for
budgetary adjustments.
XYZ COMPANY
Income Statement for the Year Ended December 31, 2013
Total Operating Revenues
Less Cost of Goods Sold
Gross Profits
Less: Operating Expenses
Selling Expenses
General and Administrative Expenses
Depreciation Expenses
Fixed Expenses
Total Operating Expenses
Net Operating Income
Other Income
Earnings Before Interest and Taxes
Less: Interest Expense
Interest on Short-Term Notes
Interest on Long-Term Notes
Total Interest Expense
Pretax Earnings
Less: Taxes
Current Taxes
Deferred Taxes
Total Taxes (rate=35%)
Net Income (Earnings after Taxes, EAT)
Less: Preferred Stock Dividends
Net Earnings Available for Common Stock
EPS 100,000 shares outstanding
Retained Earnings
2587.88
1167.25
1420.63
275
225
90
75
665
755.63
0
755.63
10
50
60
695.63
160
105.4
265.4
430.23
95
335.23
3.35
235
100
BUDGETED INCOME STATEMENT
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References
What external influences are there on a business budget? (n.d.). Retrieved January 31, 2016,
from Finance Info and Money website:
http://businessknowledgesource.com/finance/what_external_influences_are_there_on_a_
business_budget_024401.html