Project 4
1. Project 4
1.12. Page 2
Project 4: Budgeting
What Do I Need to Know?
This training room will show you how to prepare a statement in which the budgeted figures are compared to the actual figures, and then you eill analyze these numbers. This is called a comparative income statement.
The following is an example of a comparative income statement.
Microsoft product screen shot(s) reprinted with permission from Microsoft Corporation.
Notice that this business is comparing the amounts that were budgeted for the 20yy year with what the numbers actually were and indicating whether the projection was more or less than the actual amount.
Why Is This Important?
Knowing where the numbers differ from budgeted to actual allows a business to answer important questions, adjust its budget, and make business decisions regarding the company's future. For instance, refer to the comparative income statement for Simone’s Office Services. This company was projecting $5010.00 more than was actually made to prepare financial reports. The company has to take a close look at this to determine why. Perhaps the calculations were faulty, or perhaps there just isn’t a demand for financial report preparation in the current market. This data allows the company to make a decision about whether to continue to offer this service or not.
What Do I Need to Do?
Refer to Gurpreet’s Budgeted Income Statement. This was prepared in the last training room.
Microsoft product screen shot(s) reprinted with permission from Microsoft Corporation.
Open Gurpreet’s Comparative Income Statement and save it in your course folder. Complete the Increase/Decrease column.
Microsoft product screen shot(s) reprinted with permission from Microsoft Corporation.
After looking at this comparison, Gurpreet concluded that his budget was pretty close to his actual. He realized that he is making more revenue than he predicted, and Gurpreet is confident that his projections for 2017 are realistic.