Financial Budgeting

Financial Budgeting
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Financial Budgeting
From the budgeted income statement provided, the performance of Ciccetti Corporation was favorable for the period under consideration. The company had forecasted that it would serve 33,000 customers but ended up serving 36,000 customers resulting in an increased revenue of US$ 14,400 on top of the originally budgeted revenue. In terms of expenses, only the budgeted insurance cost was accurate. Wages and salaries increased by 4800, the expenses on supplies increased by 2700, and the miscellaneous expenses increased by 1200. Overall, the total expenses for the period increased by 8700. While the increase may be considered negative, it was expected given that the expenses are heavily tied to the number of customers served. Overall, the net operating income for the period increased by US$ 5700 from the budgeted US$ 6,200 to the final reported amount of US$ 11,900.
Notably, the provided flexible income statement budget provides a reliable starting point for developing the company’s financial statement as it provides an accurate representation of the expected financial performance. The list of the project revenues, expenses, and net operating income can be used to compile the annual budgeted income statement reflective of the anticipated financial results based on the actual activity levels achieved during the budgeted period. From the budgeted income statement, the impact of the projected revenue and expenses on the balance sheet accounts can be estimated (Shim, Siegel, & Shim, 2011). The process involves listing the projected figures for assets, liabilities, and equity that considers the impact of the budgeted income statement. Further, the budgeted income statement can indicate the expected cash inflows and outflows that are essential for the preparation of the budgeted cash flow statement. Once the budgeted financial statements are prepared, they will be reviewed and refined to ensure that they are realistic and as accurate as possible.
A static budget and a flexible budget are two distinct approaches to budgeting that serve different purposes in financial management. A static budget is based on a fixed set of assumpti...