Prepare a Budgeted Statement of Financial Position as at 31 December 2022 using the below information: Statement of comprehensive income for the year ended 31 December 2021 Sales 10 000 000 Cost of sales (5 750 000) Gross profit 4 250 000 Variable selling and administrative expenses (1 500 000) Fixed selling and administrative expenses (500 000) Net profit 2 250 000 Statement of financial position as at 31 December 2021 ASSETS Non-current assets 800 000 Property, plant and equipment 800 000 Current assets 3 400 000 Inventories 1 600 000 Accounts receivable 600 000 Cash 1 200 000 4 200 000 EQUITY AND LIABILITIES Equity 3 760 000 Current liabilities 440 000 Accounts payable 440 000 4 200 000 Additional information: 1. The sales budget for 2022 is as follows: First quarter R2 625 000 Second quarter R2 750 000 Third quarter R2 875 000 Fourth quarter R2 750 000 2. 90% of the sales is collected in the quarter of the sale and 10% in the quarter following the sale. 3. The gross margin ratio for 2022 is expected to be the same as for 2021. 4. Inventory is purchased in the quarter of the expected sale. Eighty (80%) of inventory purchases is paid for in the quarter of purchase and twenty percent (20%) is paid for in the quarter following the purchase. 5. The inventories balance at the end of each quarter is expected to be the same as the end of the last quarter of 2021 viz. R1 600 000. 6. Variable selling and administrative expenses will vary in the same ratio to sales as for 2021. 7. Fixed selling and administrative expenses will be the same as for 2021 and will include annual depreciation of R160 000 on property, plant and equipment. 8. On 31 December 2022 an old vehicle with a cost price of R180 000 and accumulated depreciation of R150 000 will be traded-in for new vehicle. The new vehicle will cost R400 000 and the trade-in value of the old vehicle is expected to be R50 000. 9. The proprietor’s drawings for 2022 are estimated to be R1 527 000. 10. The cash balance must be calculated (balancing figure)
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Prepare a Budgeted Statement of Financial Position as at 31 December 2022 using the below information:
Statement of comprehensive income for the year ended 31 December 2021
Sales 10 000 000
Cost of sales (5 750 000)
Gross profit 4 250 000
Variable selling and administrative expenses (1 500 000)
Fixed selling and administrative expenses (500 000)
Net profit 2 250 000
Statement of financial position as at 31 December 2021
ASSETS
Non-current assets 800 000
Property, plant and equipment 800 000
Current assets 3 400 000
Inventories 1 600 000
Cash 1 200 000
4 200 000
EQUITY AND LIABILITIES
Equity 3 760 000
Current liabilities 440 000
Accounts payable 440 000
4 200 000
Additional information:
1. The sales budget for 2022 is as follows:
First quarter R2 625 000
Second quarter R2 750 000
Third quarter R2 875 000
Fourth quarter R2 750 000
2. 90% of the sales is collected in the quarter of the sale and 10% in the quarter following the sale.
3. The gross margin ratio for 2022 is expected to be the same as for 2021.
4. Inventory is purchased in the quarter of the expected sale. Eighty (80%) of inventory purchases is paid for in the
quarter of purchase and twenty percent (20%) is paid for in the quarter following the purchase.
5. The inventories balance at the end of each quarter is expected to be the same as the end of the last quarter of
2021 viz. R1 600 000.
6. Variable selling and administrative expenses will vary in the same ratio to sales as for 2021.
7. Fixed selling and administrative expenses will be the same as for 2021 and will include annual
R160 000 on property, plant and equipment.
8. On 31 December 2022 an old vehicle with a cost price of R180 000 and
will be traded-in for new vehicle. The new vehicle will cost R400 000 and the trade-in value of the old vehicle is
expected to be R50 000.
9. The proprietor’s drawings for 2022 are estimated to be R1 527 000.
10. The cash balance must be calculated (balancing figure)
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