Budgeted Balance Sheet

Learning Outcomes

  • Create a budgeted balance sheet

Ok, one more piece of our puzzle to finish up! The balance sheet gives us a snapshot in time. In this case, a snapshot in our budgeted time. There are lots of pieces of the puzzle, so let’s take a few minutes to review:

One more reminder: [latex]\text{assets}=\text{liabilities}+\text{stockholder's equity}[/latex]

This accounting equation may come in handy as we work through this process.

If sales, costs and expenses all follow the budget, here is what our year end balance sheet will look like!

Hupana Running Company Budgeted Balance Sheet
Assets
Current Assets
Cash $112,275
Raw Materials Inventory $1,000
Finished Goods Inventory $3,825
Total Current Assets $117,050
Plant and Equipment
Land $25,000
Buildings and Equipment $50,000
Accumulated Depreciation $(4,000)
Plant and Equipment, Net $71,000
Total Assets $188,050
Liabilities and Owner’s Equity
Current Liabilities
Accounts payable $ –
Stockholder’s Equity
Common stock $50,000
Retained earning $138,050
Total stockholder’s equity $188,050
Total liabilities and stockholder’s equity $188,050
Note: We made some beginning balance assumptions here: the land and buildings were already there, along with the stock and a beginning retained earnings of $31,050.

So overall, Hupana Running Company is in great shape if the budget goes as planned. But, budgets don’t always go as planned, so having a cash cushion is a great thing! They could have reduced sales, or price reductions and still be ok. They did a great job of creating a cushion, where if things happen, they will still be fine.

Most businesses make some changes during the year to the budget. The budget is a guide, and must be considered a fluid document, that can be changed as new information or situations occur.

Practice Questions

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