Definition:
A budgeted income statement is a projected financial statement that shows a company’s expected revenues and expenses over a specific period of time. It’s based on the company’s budget and forecasts for future sales and costs.
Key components of a budgeted income statement:
- Projected revenue: The expected revenue from sales and other sources.
- Projected expenses: The expected costs, such as cost of goods sold, operating expenses, and interest expense.
- Projected net income: The expected profit or loss after deducting expenses from revenue.
Why are budgeted income statements important?
- Financial planning: Budgeted income statements are essential for financial planning, as they help companies to forecast their future profitability.
- Decision-making: They can be used to make informed decisions about pricing, costs, and other strategic matters.
- Performance evaluation: Budgeted income statements can be compared to actual results to assess the effectiveness of the company’s financial planning and management.
In essence, a budgeted income statement is a projected financial statement that shows a company’s expected revenues and expenses, and it’s a valuable tool for financial planning and decision-making.
