Assignment | The budgeted incomes statement for the year 2019

Accounting

Accounting 1
Executive summary
The aim of the report is to analyse the budgeted incomes statement for the year 2019 of the
company. The ASX Company that has been selected for the analysis is Apollo Minerals Limited
and it focuses on the development of the Couflens Project in the area of Southern France and
progress of the adjacent Aurenere project in the neighbouring country that is Spain. The findings
of the report include the in-depth explanation related to the master budget and its different types
of elements which makes this concept easily approachable for any company. The two approaches
which are majorly used by the company are top-down and the bottom-up approach. These
approaches are compared in the assessment to identify the best suitable approach for Apollo
Minerals Limited. In the end, it includes the findings related to the budgeted income statement of
the company for the year 2019 that is based on the year 2018.

Accounting 2
Contents
Introduction......................................................................................................................................4
About Apollo Minerals Limited..................................................................................................4
Master budget..................................................................................................................................5
Elements of Master budget..............................................................................................................5
Sales budget.................................................................................................................................5
Capital expenditure budgets........................................................................................................6
Production budget........................................................................................................................6
Cash budget.................................................................................................................................7
Manufacturing overhead budget..................................................................................................8
Direct materials budget................................................................................................................8
Direct labour budget....................................................................................................................8
Selling and administrative budget...............................................................................................8
Budgeted financial statements.....................................................................................................9
Comparison of a top-down and bottom-up approach to the budget process...................................9
Bottom-up approach....................................................................................................................9
Top-down approach...................................................................................................................10
Comparison chart.......................................................................................................................10
Suggestion for the approach to the company.................................................................................11
Budgeted income statement for 2019............................................................................................12

Accounting 3
Opinion on Changes..................................................................................................................13
Conclusion.....................................................................................................................................15
References......................................................................................................................................16
Appendix........................................................................................................................................18

Accounting 4
Introduction
The report focuses on understanding the concept of the budgeted income statement of the Apollo
Minerals Limited for the year 2019 which is based on the revenue and expenses for the year
2018. The income statement of the company majorly reflects the expenditure and revenue for the
particular period of time which generally includes 12 months. The report includes the
explanation of the master budget which is considered as one of the effective concepts of the
accounting. Along with this, the details related to the elements of the accounting are also
discussed in the report which shows the way master budget is created by the company with the
use of its elements. Moreover, the budgeting of the elements needs the company to implement
the budgeting approach which majorly includes top-down approach and bottom-up approach.
The differences among both the approaches are conducted in the report which will help in
analysing the suitable option for the Apollo Minerals Limited. Further, it includes the analysis of
the budgeted income statement of Apollo Minerals Limited for the year 2019 with the opinion of
the differences that take place.
About Apollo Minerals Limited
Apollo Mineral is one of the ASX listed company who majorly focuses on the development of
the Couflens Project in southern France. This has been found that the company is exploring
different gold and tungsten targets in the wider region around both the Couflens Project France
and Aurenere Project in Spain (Apollo minerals, 2018). The company is committed to
developing a modern and responsible as they believe in transparency which the company is
committed to majorly form the sustainable value for our stakeholders (Apollo minerals, 2018).

Accounting 5
Master budget
Master budget is considered as one of the effective accounting concepts which help the business
in performing their operations effectively. The master budget is referred to as one of the plans
which are prepared with the objective to manage the activities like manufacturing and sales of
the company. These activities help the company in accomplishing the cash flow goods and profit
of the company. In other words, this can be said that master budget majorly reflects the
management strategic plan for the future aspects of the company (Accounting tools, 2018). The
company ensure that every aspect of operations is documented and charted with the motive of
the future estimations.
Elements of Master budget
Master budget includes different elements which are essential to be considered by the company
while preparing a master budget. These elements of master budget are discussed below: -
Sales budget
The sales budget is considered as one of the important budgets which is essential to be
considered by the company while preparing the master budget. The sales budget leads to the
straight results that are based on the prediction of related the demand and supply situation, the
competition that is present in the market, the estimation of sales, historical data related to sales
and changes that create the impact on sales (Gitman, Juchau and Flanagan, 2015). These factors
are considered by the company while preparing the sales budget which contributes to master
budget. This has been found that most of the companies make use of this budget with the motive
to prepare the departmental goals. For instance; the marketing and sales team need to ensure the
units of products that they have to sell to meet their targets. Moreover, the sales budget will also

Accounting 6
show the estimation of the earning that will be attained by the companies. Thus, this has been
found that sales budget created the impact in both the overall master budget and the operating
master budget.
Capital expenditure budgets
Capital expenditure budget is referred to a budget plan which is essential to be prepared by the
long term investment. This includes the prediction for new plant’s and equipment’s that are
planned by the company, foremost installation and many other expenses which are faced by the
company in their businesses. The capital budgeting is done by the companies mainly because of
the long term planning that includes the various phase of the database which is considered as
milestones (Kapinos and Mitnik, 2016). Each phase of capital budgeting is estimated and
planned on the basis of time, cost, efforts that are available in the self-controlled method.
Production budget
The production budget is another important element or component of the master budget which is
required to be considered by the company. This budget is majorly prepared for the computation
of the master budget because it requires the production budget which includes the future
estimation of manufacturing operations that has been done on sales budget. Production budget is
prepared with the motive of the high consumption of the approaches and services. This budget
majorly includes the formation of the two budgets which include manufacturing volume budget
and cost of manufacturing budget (Hilton and Platt, 2013).
It has been observed that the volume budget include the estimation of the units of products which
are produced by the company. The budget includes the planning for the goods and services
which are majorly manufactured by them for completing the obligations. The estimation of the

Accounting 7
products that are required to be produced by the company provides the insight about the
production activity and the resources that will be required by the company for conducting the
production activity.
Cash budget
One of the most important elements of the master budget is cash budget; it shows the prediction
for the inflows and outflows of the cash by the company while conducting their business
operations in the specific period of time. The budgets of cash will help the company in analysing
the amount that the company is expected to receive and supposed to pay (Warren, Reeve and
Duchac, 2013). This shows that cash budget is majorly used to analyse that the company is
equipped with sufficient cash or not which is required to be operated by the company for
effective business operations. The forecasting of the cash budget involves the budget of
production and sales as it includes products which are produced by the company and the sales
which will be made by the company.
According to the estimation, the cash budgeting will be done by the company which will help in
maintaining the liquidity of the company in the market. This liquidity will help the company to
meet its obligations. For instance; payroll of the employees which is due to be paid by the
company in the next two weeks and utilities that are required to be paid by the company. Thus,
the prediction in the cash budget will allow the management to predict the shortfalls in the
company and this will help in resolving the problems before the due actually arise. Thus, this can
be said that the cash budget contributes effectively in the formulation of the master budget.

Accounting 8
Manufacturing overhead budget
Manufacturing overhead budget is the budget which is prepared by the company which include
the estimation of the cost that indulges in the manufacturing rather than the cost of direct
material and direct labour (Trotman and Carson, 2018). This has been found that in the
preparation of the master budget, manufacturing overhead budget contributes effectively as it
converts the master budget COGS element. Thus, this reflects that it is essential for the company
to predict the amount of manufacturing overhead.
Direct materials budget
Another element of the master budget is Direct material budget which helps the company in
estimating the amount associated with the material which they are purchasing in the set time
period. This budget is prepared by the company who deals on a frequent basis for the raw
material because they want to calculate the exact amount of cash inflows and outflows (Noreen,
Brewer and Garrison, 2014). Thus, it shows that this budget contributes effectively while
forming the master budget.
Direct labour budget
The labour budget is prepared by the company to analyse and evaluate the number of employees
which will be required by the company to meet the details of the master budget. In the budgeting
period, the company ensure that they have proper labour force who will be required for
performing the work effectively (Pilbeam, 2018).
Selling and administrative budget
The administrative and selling are considered as the expenses which are faced by the company
and the budget of these expenses will help in analysing the amount that they are supposed to pay

Accounting 9
in the budgeted year. This budget includes all non-manufacturing subdivisions which include
book-keeping and services departments, sales and other. The forecasting is spilt into the different
segments so that effective budget is prepared (Accounting tools, 2018). The preparation of the
master budget profit and loss statement is based on the expenses prediction along with the other
expenses which include depreciation and interest.
Budgeted financial statements
This budget is usually limited to the summary level income statement and the balance sheet
which are lined with the model of the budget. The prediction of the master budget requires the
involvement of the budgeted financial statement (Simkin, Norman and Rose, 2014).
The above discussed are the elements of the master budget which are required to be considered
by the company. All these elements include the different budgets which are prepared with the
accurate details.
Comparison of a top-down and bottom-up approach to the budget
process
Bottom-up approach
The bottom-up approach is one of the effective and crucial approaches which is used by the
company at the time of budgeting process. The process in the approach begins with the different
subdivisions available in the company with the motive to form the budget and then send it to the
upward for the approval of the top level management (Weygandt, Kimmel and Kieso, 2015). The
budget is sent for the approval to bring the modification in the master budget by the top level
management so that they can find that the goals of the organisations are properly acknowledged

Accounting 10
and taken into the consideration by the company. The benefit of the bottom-up budgeting
includes the different types of advantages which show that the computation has been done of the
accurate figure which the motive to improve the budgeting of the company. This has been found
that approach is suitable for the budgeting of the big companies who perform their operations in
different segments and a different number of branches across the world. Though, the
disadvantage of the approach is that employees and manager of the company prepare the budget
in the way so that they can accomplish the goals of the department instead of their organisation.
This has been found that they consider the organisation but goals and objectives remain focuses
towards the department.
Top-down approach
The top-down approach is another effective method of budgeting which is used by the companies
for bringing the improvement in the high-level budget. In this approach, the company prepares
the master budget on the behalf of different departments with the motive that every department
form the objectives that are linked to the goals of the company (Garrison, Noreen, Brewer and
McGowan, 2010). This approach has different benefits and disadvantages that are offered by the
approach to the company. Further, this has been found that top-down strategy calls for every
decision that is required to be made by the senior organisational leaders. The approach includes
the systems which are formulated, specifying but not detailing or any type of the first-level
subsystems. The other benefit of the top-down approach is that decisions can be prepared and
implemented very quickly. Though, the approach has some of the disadvantages which include
the lack of skills of employees that can affect the skills of the budget and will misguide the
employees towards the goal of the organisations.

Accounting 11
Comparison chart
Basis of
comparison
Top-down approach Bottom-Up Approach
Basic In this approach, the massive
problem breaks into the different
small subproblems.
This approach solves the low-level
fundamental problems and combines
them into the larger one.
Process The process in the top-up approach
shows that submodules are
solitarily analysed.
In this approach, the examination of
the data is to be encapsulated and
applied to the information hiding.
Communication Communication among the team
and departments is not required in
the approach of top-down (Tech
Differences, 2017).
In this approach, communication is
required for the proper estimations of
the budgets.
Redundancy In this approach the information
contains redundant.
Redundancy can be eliminated in this
approach.
Historical data In this approach, the estimation of
the budget majorly relies on the
historical data of the company.
In this approach, the departments
consider the historical data while
preparing the budget as this will help
them in predicting the amount.

Accounting 12
Risk The top-down approach is majorly
used for analysing the risk by
combining the impact of the
interior processes failure.
On the other hand, the bottom-up
approach analyses the risk majorly in
the individual process by using the
models.
Data-intensive The approach is simple and not
data intensive when it comes to
predicting the budget (Chandan,
2017).
This approach is complex and very
data intensive which takes time while
preparing the budget.
Suggestion for the approach to the company
The discussion and comparison of both the approaches of budgeting have been done on the basis
of which it can be decided the approach that is suitable for the company. It is suggested to
Apollo Minerals Limited to make use of the Top-down approach as this will be beneficial for the
company. The company needs to be careful enough while preparing the budget due to which the
top management should take the responsibility of preparing the budget. Along with this, the
applicability of this approach will help the company to save the time consumed by the employees
who majorly indulge in the daily operations. Moreover, this approach will help the Apollo
Minerals Limited to make the decisions as quickly as it is possible (Kaplan and Atkinson, 2015).
Though, on the other hand, this has been found that in the bottom-up approach the company
takes the time while preparing the budgets and making the decisions.

Accounting 13
The budgeted income statement for 2019
Apollo Minerals Limited budgeted income for the year 2019 is presented with the changes that
are required to be included which are discussed below: -
 Sales are expected to rise by 10%
 Costs of Goods Sold are likely to increase by 8%
 Expenditures are expected to increase by 2%.
The variance between the budgeted and actual income statement of the company is shared which
will reflect how the above changes will create an impact on the company.
Apollo Minerals Limited income statement for the year 2018 and 2019
Consolidated Statement of Profit or Loss and Other
Comprehensive Income
Actual Budgeted Variance
Particulars 2018 2019
$ $
Revenue and other income 1,064,744 1,171,218 -10%
Exploration and evaluation expenses
(2,594,359.0
0)
(2,646,246.1
8) -2%
Corporate and administrative expenses
(619,077.0
0)
(631,458.5
4) -2%
Business development expenses
(523,442.0
0)
(533,910.8
4) -2%
Share based payment expenses
(281,703.0
0)
(287,337.0
6) -2%
Impairment of exploration and evaluation expenditure
(50,000.
00)
(51,000.
00) -2%
Loss before income tax
(3,003,837.0
0)
(2,978,734.2
2) 1%
Income tax expense - 0
Loss for the year
(3,003,837.0
0)
(2,978,734.2
2) 1%

Accounting 14
Other comprehensive income, net of income tax:
Items that may be reclassified subsequently to profit or loss:
Exchange differences on foreign entities
391,790.
00 0 100%
Other comprehensive income for the year, net of tax
391,790.
00 0 100%
Total comprehensive loss for the year
(2,612,047.0
0)
(2,978,734.2
2) -14%
Note: Items that may be reclassified subsequently to profit or
loss cannot budget for the budgeted year.
Note: Cost of goods sold is not available due to which it cannot
be projected for the year 2019.
Opinion on Changes
This section of the report include the major changes that have been identified with the
comparison of the actual 2018 income statement with the budgeted 2019 income statement. The
variance reflects that the sales of the company are projected to increase by 10% with the rise in
the expenses in the coming year. The expenses of the company will increase in the budgeted year
that is 2019. This has been found from the income statement of the company that in the year
2018, the company registered a loss which reduces only by 1% in the year 2019. This is possible
if in case the company is able to increase the sales of the product by 10%. The rise in the sales
will help the company in meeting the expenses completely. Moreover, this will also help the
company in attaining the decrease in the loss. Considering the income statement of the company
this is said that they need to either reduce the expenses or increase the sales so that they can
convert their loss situation into profit (Apollo minerals, 2018).

Accounting 15
This has been found that the budgeted income statement shows the changes in the actual and
budgeted. The calculation of the variance helps the company in evaluating that the company
should maintain enough funds to meet the obligations. This shows that the company need to be
more focused on the allocation of the cost and resources so that they can easily reduce the
expenses which are faced by them. Though this has been found that there is the possibility of the
unexpected expenses that can take place in the near future but the income statement of the
company shows that they are not prepared for any additional expenses. The rise in the expenses
of the company will make them face the loss in the next year.

Accounting 16
Conclusion
At the end of the report, this can be said that master budget formation needs the support of the
elements of the budget which include the different types of the budget that contribute enough in
preparing the master budget. The explanations of the master budget with the elements of the
master budget are explained in the report. The budgeting process majorly involves two
approaches which include top-down and bottom-up approach. Considering the detail description
it is suggested to the company to select the top-down approach for the business. This approach
will contribute effectively informing the accurate budget within the organisation. Further, the
actual and budgeted income statement of the Apollo Minerals Limited is done in the report
which shows the changes that might take place in the year 2019. The variance of the income
statement is also evaluated in the report which shows the difference that will take place from the
data 2018 to 2019.

Accounting 17
References
Accounting tools (2018) Master Budget [Online]. Available from:
https://www.accountingtools.com/articles/2017/5/14/master-budget [Accessed on 24th January
2018]
Accounting tools (2018) Selling and administrative expense budget. [Online]. Available from:
https://www.accountingtools.com/articles/2017/5/17/selling-and-administrative-expense-budget
[Accessed on 24th January 2018]
Apollo Minerals (2018) About Us [Online]. Available from: https://apollominerals.com/about-us/
[Accessed on 24th January 2018]
Apollo Minerals (2018) Annual report 2018 [Online]. Available from:
https://apollominerals.com/wp-content/uploads/2018/09/AON-Annual-Report-
2018_MERGED.pdf [Accessed on 24th January 2018]
Apollo Minerals (2018) Our Vision and strategy [Online]. Available from:
https://apollominerals.com/about-us/our-vision-and-strategy/ [Accessed on 24th January 2018]
Chandana (2017) Top-down Approach Vs. Bottom-up Approach [Online]. Available from:
https://www.simplilearn.com/top-down-approach-vs-bottom-up-approach-article [Accessed on
24th January 2018]
Garrison, R.H., Noreen, E.W., Brewer, P.C. and McGowan, A. (2010) Managerial
accounting. Issues in Accounting Education, 25(4), pp.792-793.

Accounting 18
Gitman, L. J., Juchau, R., and Flanagan, J. (2015). Principles of managerial finance. AU:
Pearson Higher Education.
Hilton, R.W. and Platt, D.E. (2013) Managerial accounting: creating value in a dynamic
business environment. New York: McGraw-Hill Education.
Kapinos, P., and Mitnik, O. A. (2016). A top-down approach to stress-testing banks. Journal of
Financial Services Research, 49(2-3), 229-264.
Kaplan, R.S. and Atkinson, A.A. (2015) Advanced management accounting. PHI Learning.
Noreen, E.W., Brewer, P.C. and Garrison, R.H. (2014) Managerial accounting for managers.
New York: McGraw-Hill/Irwin.
Pilbeam, K. (2018). Finance and financial markets. UK: Macmillan International Higher
Education.
Simkin, M.G., Norman, C.S. and Rose, J.M. (2014) Core concepts of accounting information
systems. New Jersey: John Wiley & Sons.
Tech Differences (2017) Difference between Top-down and Bottom-up Approach [Online].
Available from: https://techdifferences.com/difference-between-top-down-and-bottom-up-
approach.html [Accessed on 24th January 2018]
Trotman, K., and Carson, E. (2018). Financial accounting: an integrated approach. AU:
Cengage.
Warren, C., Reeve, J. M., and Duchac, J. (2013). Financial and managerial accounting.
Chicago: Cengage Learning.

Accounting 19
Weygandt, J. J., Kimmel, P. D., and Kieso, D. E. (2015). Financial and managerial accounting.
New Jersey: John Wiley and Sons.
Appendix
Consolidated Statement of Profit or Loss
and other Comprehensive Income
Actual Budgeted Variance
Particulars 2018 2019
$ $
Revenue and other income 1,064,744 1,171,218 -10%
Exploration and evaluation expenses (2,594,359.00) (2,646,246.18) -2%
Corporate and administrative expenses (619,077.00) (631,458.54) -2%
Business development expenses (523,442.00) (533,910.84) -2%
Share based payment expenses (281,703.00) (287,337.06) -2%
Impairment of exploration and evaluation
expenditure (50,000.00) (51,000.00) -2%
Loss before income tax (3,003,837.00) (2,978,734.22) 1%
Income tax expense - 0
Loss for the year (3,003,837.00) (2,978,734.22) 1%
Other comprehensive income, net of income tax:
Items that may be reclassified subsequently to
profit or loss:
Exchange differences on foreign entities 391,790.00 0 100%
Other comprehensive income for the year, net of
tax 391,790.00 0 100%
Total comprehensive loss for the year (2,612,047.00) (2,978,734.22) -14%

Accounting 20
Note: Items that may be reclassified subsequently
to profit or loss can not budgeted for the budgeted
year.
Note: Cost of goods sold is not available due to
which it cannot be projected for the year 2019.
Consolidated Statement of Profit or Loss and other Comprehensive Income