Financial Budget Project: Income Statement and Balance Sheet

This project presents a comprehensive financial budget analysis for Laura Golarsa and Rex's Fishing Supplies, focusing on the creation and interpretation of key financial statements. Part A meticulously constructs a budgeted income statement for the quarter ending September 30, detailing sales, cost of goods sold, operating expenses, and ultimately, the budgeted profit. Supporting calculations are provided, including the determination of purchases and bad debts. Additionally, a budgeted balance sheet as of September 30 is presented, outlining the assets, liabilities, and equity of the business. Part B shifts focus to the statement of cash flow, offering a budgeted statement of cash flows for the year ended June 30, 2014, categorizing cash flows from operating, investing, and financing activities. The document provides detailed notes and calculations to support the financial data, ensuring a thorough understanding of the budgeting process. References to relevant financial resources are also included.

ASSESSMENT -3: FINANCIAL
BUDGET

Contents
Part A: Income Statement and Balance sheet..............................................................................................2
a) Budgeted Income statement for the quarter ended 30 September....................................................2
a) Budgeted Balance Sheet as at 30 September....................................................................................3
Part B: Statement of Cash Flow...................................................................................................................7
References:..................................................................................................................................................9

Part A: Income Statement and Balance sheet
Financial statements are an important part of the business and helps in summarizing and
presenting the financial information to the users of the financial statements. The companies are
required to prepare and present the financial statements at the end of every reporting period. The
financial statements includes the income statement, balance sheet and the statement of cash flow.
The income statement shows the summary of incomes earned and expenses incurred during the
period. It shows the net profit earned or loss incurred during the period. Similarly, the balance
sheet shows position of assets and liabilities as on the reporting date. It provides the bird eye
view of the assets, liabilities and equities. It helps in managing the business and taking major
financial decisions. It bifurcates the assets and liabilities into current and non-current on the basis
of periodicity. Generally, the items which falls within 12 months from the reporting date are
termed as current and which falls beyond after 12 months are treated as non-current.
a) Budgeted Income statement for the quarter ended 30 September
In the given case, we are asked to prepare the budgeted income statement of the company.
Laura Golarsa
Budgeted Income Statement for the quarter ended September 30
Description Amount
Sales $52,500
Less: cost of goods sold
Opening inventory $4,000
Purchases (note-a) $29,450
Closing inventory -$5,000 $28,450
Gross margin $24,050
Operating expenses
Marketing expense (15% of sales) $7,875
General & administration expense (5% of sales) $2,625
Motor vehicle running expense $775
Depreciation - motor vehicles $3,600
Depreciation - plant & equipment $660
Bad debt expense (refer Wn-2) $840

Interest on loan $1,850
Total operating expenses $18,225
Budgeted Profit $5,825
Note-a: Calculating purchases:
Description Amount
Sales for the quarter $52,500
Cost of goods sold $30,000
Add: Ending inventory $5,000
Less: Beginning inventory -$4,000
Purchases for the quarter $31,000
Discount @ 5% $1,550
Net purchases $29,450
Note-b: Computation of bad debts:
Description Amount
Sales for the quarter $52,500
Credit Sales $42,000
Bad debts (2% of sales) $840
a) Budgeted Balance Sheet as at 30 September
Laura Golarsa
Budgeted Balance Sheet
As at 30 September
Description Amount
Assets
Non-current assets
Plant & equipment $6,600
Accumulated Depreciation - Plant & equipment (note-g) -$3,300
Motor vehicles $18,000
Accumulated Depreciation - Motor vehicle (note-g) -$8,100

Land & Buildings $225,000
$238,200
Current assets
Cash at bank (note-c) $14,740
Inventory $5,000
Accounts receivable (note-d) $9,660
$29,400
Total assets $267,600
Liabilities & equities
Non-current liabilities
Bank loan (note-f) $40,000
Current liabilities
Accrued expenses payable $775
Equity
Capital: Laura Golarsa (note-e) $226,825
Total liabilities & equity $267,600
Note-c: Budgeted cash flow statement
Description Amount
Collections:
Collection from cash sales $10,500
Collection from credit sales (note-d) $31,500
Collection from opening accounts receivables $3,100
Additional capital introduced $21,000
Total cash collections $66,100
Payments:
Motor vehicle running expense -$530
Purchases payment -$29,450
Marketing expense -$7,875
General & administration expenses -$2,625
Bank loan repayment -$11,730

Interest expense -$1,850
Total cash outflow -$54,060
Net increase in cash $12,040
Cash as on June 30 $2,700
Cash as on September 30 $14,740
Note-d: Computation of accounts receivables closing balance
Description Amount
Total sales $52,500
Credit sales $42,000
Collected during the quarter $31,500
Uncollected during the quarter $10,500
Less: Bad debts -$840
Closing balance $9,660
Note-e: Computing of closing balance of capital
Description Amount
Opening balance $200,000
Additional capital $21,000
Profit for the quarter $5,825
Closing balance $226,825
Note-f: Computing of closing balance of loan
Description Amount
Bank loan - opening $51,730
Less: Repayment -$11,730
Closing balance $40,000
Note-f: Computing of closing balance of Accumulated depreciation
Description Plant & equipment Motor Vehicles
Opening balance $2,640 4,500

Depreciation for the quarter $660 3,600
Closing balance $3,300 $8,100

Part B: Statement of Cash Flow
Cash flow statement is an important statement which shows the movement of cash inflow and
cash outflow. It helps in keeping track of cash outgo and thus helps in maintaining the cash. It is
one of the important financial statement prepared. It bifurcates the items into three categories,
one is cash flow from operating activities, another is cash flow from financing activities and third
is cash flow from financing activities. Operating activities includes the cash generated or used
for the items that are required for the operation of the business. Similarly, investing activities
includes investment items like purchase of fixed assets, investment in equity or mutual funds,
etc. The financing activity includes the items which involves cash inflow or outflow from
borrowing or arrangement of funds. For instance, proceeds from loan taken from bank, or cash
outflow for interest paid etc. The cash flow statement at end summarizes the net cash in hand.
The budgeted statement of cash flow as required in the assignment is listed below:
Rex's Fishing Supplies
Budgeted Statement of Cash Flows
For the year ended 30 June, 2014
Description Amount
Cash flow from operating activities:
Cash sales $87,200
Receipts from accounts receivable $130,800
Payment to accounts payable -$65,400
Operating expenses paid -$43,600
Net cash inflow from operating activities - (a) $109,000
Cash flow from investing activities:
Investment income received $5,000
Purchase of shop fittings -$10,900
Net cash outflow from investing activities - (b) -$5,900
Cash flow from financing activities:
Repayment of bank loan -$50,000
Drawing by Rex -$30,000
Net cash outflow from financing activities - (c) -$80,000
Net increase in cash (a+b+c) $23,100

Cash at bank 01 July 2013 $15,000
Total available cash $38,100
Cash at bank 30 June 2013 (Budgeted) $30,000
Remittance of net VAT collected to FCRA $8,100

References:
Investopedia. (2019). Cash Flow Statement. [online] Available at:
https://www.investopedia.com/terms/c/cashflowstatement.asp [Accessed 29 Apr. 2019].
Smallbusiness.chron.com. (2019). What Is a Budgeted Income Statement?. [online] Available at:
https://smallbusiness.chron.com/budgeted-income-statement-22939.html [Accessed 29 Apr.
2019].
The Balance Small Business. (2019). How the Cash Budget Differs From the Statement of Cash
Flows. [online] Available at: https://www.thebalancesmb.com/cash-budget-vs-flow-393122
[Accessed 29 Apr. 2019].