Budgeting Basics and Beyond

6.13. Budgeted Balance Sheet

The budgeted balance sheet is developed by beginning with the balance sheet for the year just ended and adjusting it, using all the activities that are expected to take place during the budgeting period. Some of the reasons why the budgeted balance sheet must be prepared are:

• It could disclose some unfavorable financial conditions that management might want to avoid.

• It serves as a final check on the mathematical accuracy of all the other schedules.

• It helps management perform a variety of ratio calculations.

• It highlights future resources and obligations.

We can construct the budgeted balance sheet by using:

• The December 20A balance sheet (Schedule 10)

• The cash budget (Schedule 8)

• The budgeted income statement (Schedule 9)

Putnam's budgeted balance sheet for December 31, 20B, is presented next. Supporting calculations of the individual statement accounts are also provided.

Schedule 10

To illustrate, we will use this balance sheet for the year 20A.

Table 6.10. THE PUTNAM COMPANY Balance Sheet December 31, 20A

Assets
Current assets:
Cash	$19,000
Accounts receivable	100,000
Materials inventory (490 lbs.)	2,450
Finished goods inventory (200 units)	16,400
Total current assets		$137,850
Plant and equipment:
Land	30,000
Building and equipment	250,000
Accumulated depreciation	(74,000)
Plant and equipment, net		206,000
Total assets		$343,850

Liabillities and Stockholders' Equity
Current liabilities
Accounts payable (raw materials)	$6,275
Income tax payable	60,000
Total current ...