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How to Prepare Budgeted Balance Sheet

A budgeted balance sheet shows estimated financial position of a company. By seeing budgeted balance sheet, we can expect same at the end of the financial year. But this is not real balance sheet. When it is not real, then what is the need of preparing  it and why I am here to explain it?

Reason behind this is very clear. It is useful tool for management for decision making. We know management makes almost all type of budget. We should see all these budget' s effect on our future financial position. Future is in our hand. We have made cash budget, material budget, production budget, sales budget, purchase budget and master budget and other departments' budgets. After this, we should make budgeted balance sheet to check whether all budget's effect is positive on on our estimated financial position or not.

Now, I am explaining the steps to make it.

1. Take the Beginning Real Balance Sheet 

For making budgeted balance sheet, we take all the data of real balance sheet of beginning of financial year.

2. Collect the Data of All Budget 

For making budgeted balance sheet, you need to collect the data of various budget like cash budget, purchase budget, finished goods budget, raw material budges, projected sales or purchase deal of fixed assets on credit.

3. Adjustment of Beginning Real Balance Sheet with Data of Different Budgets 

If your hand is good on ms excel, within just few minutes, you can make budgeted balance sheet.

Following are the main adjustments which you should do.

Balance Sheet Items  Adjustment  Basis of Budget
a)
 Cash in Hand and at bank
Take the figure of closing cash in hand balance from cash budget Cash Budget
b) Opening Debtors + New Credit Sale - Cash  Received Sales Budget and Cash Budget
c)
Sundry Creditors
Opening Creditors+ New Credit Purchase  - New Payment Purchase budget and Cash Budget
d)
Finished Stock
Opening Finished Stock + New Production  - New total Sales (Cash+ Credit) Production, Sales and Cash Budgets
e)
Raw Material Stock
Opening Raw Material  Stock + New Purchase ( Cash+Credit)  - New Consumption  Material, production and Cash Budget
f)
Fixed Assets
Opening Balance+ New Purchase - New Sale ( Cost Value)  Cash Budget and Projected Plan Report and Plant Utilization budget
g)
Loan Liabilities
Opening Balance of Loan Liabilities + New Loan Taken - Repayments Cash Budget
h) Accumulated Depreciation Opening Balance Accumulated Depreciation + New Depreciation Overhead Budget
i)
Paid in Capital
Opening Balance of Paid in Capital + Additional Paid in Capital Cash Budget
j)
Retained Earning
Opening Retained Earning + Estimated Net Profit - (Estimated Dividend declared + Estimated Dividend Paid ) Cash Budget and Budgeted Income Statement
k)
General Reserve
Opening Balance of General Reserve + New General Reserve on Specific Rate as per law
l)
Taxation
Opening Payable Tax + New Payable Tax - (Advance+ TDS) Tax Returns, New Income Tax Law reports, finance budget of Govt. of India and Cash Budget

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Accounting Education: How to Prepare Budgeted Balance Sheet
How to Prepare Budgeted Balance Sheet
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Accounting Education
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