Budgeted financial statements may comprise the complete set of financial statements, which are:
- Income statement
- Balance sheet
- Statement of cash flows
- Retained earnings statement
Budgeted financial statements are compiled from the annual budgeting model of a business. They are useful for estimating the financial results, financial position, and cash flows of a business as of various dates in the future. They are particularly useful when creating a new budget model, since one can view the impact of adjustments to the budget model on the budgeted financial statements. The management team then goes through several iterations of the budget model to bring the financial statements into line with its expectations and what the business is financially and operationally capable of achieving.
Budgeted financial statements are usually limited to a summary-level income statement and balance sheet, and are compiled within the budget model. Once finalized, the budget information is carried over into the budget field for each line item in the financial statements within a company's accounting software. The result is "budget versus actual" financial statements, usually accompanied by a column containing a variance between the budget and actual columns. In most businesses, this reporting format is confined to the income statement; there is no "budget versus actual" report for the balance sheet.
The accounting staff then examines the reasons for the reported differences, and includes the results of its investigations for the more material variances in a report that accompanies the financial statements.
A business that does not produce an annual budget does not have budgeted financial statements. However, if it instead uses a short-range forecast, this forecast can be used to create forecasted financial statements, probably just for the next few months or quarters.