Question

What are the three basic reports, or products, of the budget process that all other schedules are prepared to support?

Explain for easy understanding

Answer 1

The basic reports are:

1. The Cash Budget, which gives the cash inflows and outflows for a period (broken into smaller periods for the sake of better planning and control) along with the beginning and ending balances of cash. It also projects the expected borrowings or investments of excess cash during the period.
2. The Budgeted Income Statement., which is a projection of the financial results for the period, giving the revenues and costs and the net result.
3. The Budgeted Balance Sheet, which gives the financial position as at the end of the budget period.

The schedules that are prepared to support the above are:

1. The Sales Budget in quantity and value, with break up for cash and credit sales.
2. The Receivables collection scehedule.
3. The Materials Budget, showing quantity and value of the materials to be purchased.
4. The Budget for Cash Disbursement for purchases.
5. The Manufacturing Overhead Budget.
6. The Administrative and Selling Overhead Budget.