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Budgeted Balance Sheet
Budgeted Balance Sheet Definition
The budgeted balance sheet contains all of the line items found in a normal balance sheet, except that it is a projection of what the balance sheet will look like during future budget periods. It is compiled from a number of supporting calculations, the accuracy of which may vary based on the realism of the inputs to the budget model.
The budgeted balance sheet is extremely useful for testing whether the projected financial position of a company appears to be reasonable. It also reveals scenarios that are not financially supportable (such as requiring large amounts of debt), which management can remedy by altering the underlying budget model.
The budget model should be constructed for each period spanned by the budget model, rather than just for the ending period, so that the budget analyst can determine whether the cash flows estimated to be generated will be sufficient to provide adequate funding for the company throughout the budget period.
Example of the Budgeted Balance Sheet
The following is an example of a budgeted balance sheet:
Very Large Corporation
Budgeted Balance Sheet
As of Year December 31, 20XX
| Current Assets | |||
| Cash | (1) | $1,500,000 | |
| Accounts receivable | (2) | 4,200,000 | |
| Raw materials inventory | (3) | 3,500,000 | |
| Finished goods inventory | (4) | 6,800,000 | |
| Total Current Assets | $16,000,000 | ||
| Fixed Assets | |||
| Office equipment | (5) | 500,000 | |
| Machinery | (6) | 9,200,000 | |
| Accumulated depreciation | (7) | -2,700,000 | |
| Net Fixed Assets | 7,000,000 | ||
| Total Assets | $23,000,000 | ||
| Current Liabilities | |||
| Accounts payable | (8) | $2,100,000 | |
| Notes payable | (9) | 5,900,000 | |
| Total Current Liabilities | 8,000,000 | ||
| Shareholders' Equity | (10) | 15,000,000 | |
| Total Liabilities & Equity | $23,000,000 |
Notes to the budgeted balance sheet example:
(1) Reference from the ending cash balance noted on the cash budget
(2) 10% of third quarter sales + 40% of fourth quarter sales
(3) Reference from the direct materials budget
(4) Reference from the ending finished goods inventory budget
(5) Reference from the capital spending budget
(6) Reference from the capital spending budget
(7) Reference from the capital spending budget
(8) Reference of all expenses in the selling and administrative expense budget, the direct materials budget, and the manufacturing overhead budget, assuming 30-day payment terms
(9) Reference from the financing budget
(10) Reference from the last actual balance sheet, plus projected budgeted net earnings
Other Budgeted Balance Sheet Issues
The totals of the asset side and the liability and equity side of the balance sheet are supposed to equal each other, but this may not be the case if the balance sheet is compiled using an electronic spreadsheet that has not been properly configured. If so, the person compiling the budget may elect to manually insert the difference between the two totals in a "plug" account, such as Other Assets or Other Liabilities. If the amount of this plug is material, it can call into question the reliability of the information in the budgeted balance sheet.
Budgeted income statement
Cash budget
Direct labor budget
Direct materials budget
Ending finished goods budget
Manufacturing overhead budget
Master budget
Production budget
Sales budget
Selling and administrative expense budget
