Budgeted Income Statement

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Budgeted Income Statement Definition

The budgeted income statement contains all of the line items found in a normal income statement, except that it is a projection of what the income statement will look like during future budget periods. It is compiled from a number of other budgets, the accuracy of which may vary based on the realism of the inputs to the budget model.

The budgeted income statement is extremely useful for testing whether the projected financial results of the company appear to be reasonable. When used in combination with the budgeted balance sheet, 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.

Example of the Budgeted Income Statement

The following is an example of a budgeted income statement:

Very Large Corporation
Budgeted Income Statement
For the Year Ended December 31, 20XX

Line Item	Source Budget	Amount
Net sales	Sales budget	$10,000,000
Less: cost of goods sold	(Cost in the ending F/G* inventory budget) x (Sales budget units)	6,500,000
Gross margin		3,500,000

Less: Selling & admin. expenses	Selling and admin. expense budget	3,250,000
Net operating income		250,000
Less: interest expense	Financing budget	75,000
Net income		$175,000

* F/G = Finished goods

Other Budgeted Income Statement Issues

The budgeted income statement works best when presented for all of the budget periods at once, so that you can compare the results for the various periods and spot anomalies that may require additional investigation.