How The Income Statement Budget Would Be Created For A Year Starting With The Sales Budget Through The SG&A Budget
The Budgeted Income Statement shows the entity’s projected financial performance for future years of operations. It aids management in defining financial targets for future years, creating and executing new methods to meet those targets, and comparing actual periodic performance to anticipated statistics (Thakur, 2021).
The revenue of Apple Inc. is mostly derived from operational profits and sales. Expenses include charges such as general and administrative expenses, the cost of products sold, and tax payments (Apple Inc., 2021).
The initial stage to create the income statement budget would be to estimate the number of product sales projected for the next year. This is accomplished by reviewing prior years’ sales and using patterns leading up to the current year to arrive at a predefined figure.
The sales budget is an estimate of expected sales and revenue that consists of the prior year’s sales in units multiplied by the expected budget to arrive at the projected sales in units multiplied by the sales price per unit to arrive at the projected sales revenue (Heisinger & Hoyle, n.d).
After determining the sales volume, the anticipated sales income is derived by multiplying the sales volume by the unit price. In Apple’s case, to find the total net and gross sales, not only the sales volume of the products but also the services should be added.
Next, we move to the next line, the operating expenses that are consists of Research and development and selling, general and administrative. Salaries for administrative employees, utility bills, advertising and marketing, office and building supplies, supplementary services, rent, and so on would all be included in this cost.
Identify The Individuals That Would Be Involved In Developing The Budgets
Some businesses use a top-down budgeting method (higher management creates the budget with little input from others), whilst others use a bottom-up budgeting approach (lower-level employees are involved in the budgeting process). The bottom-up strategy is more successful since employees are more likely to accept the budget. Whatever method is adopted, the budget committee (a body inside the company) is in charge of supervising and approving the master budget (Heisinger & Hoyle, n.d.).
At Apple, the budget meeting is held at the end of each year to set the budget for the following year, and it is attended by the branch manager, sales manager, operation manager, CFO, and CEO (Insider Intelligence, 2017)
References
Apple, Inc. (2021). Consolidated Financial Statement. Apple. https://www.apple.com/newsroom/pdfs/FY21_Q2_Consolidated_Financial_Statements.pdf
Heisinger, K., & Hoyle, J. B. (n.d.). Accounting for Managers. https://2012books.lardbucket.org/books/accounting-for-managers/index.html
Insider Intelligence. (2017, February 17). Apple’s CFO explains the company’s $10 billion R&D budget. Business Insider. Retrieved July 19, 2022, from https://www.businessinsider.com/apples-cfo-explains-the-companys-10-billion-rd-budget-2017-2
Thakur, M. (2021, November 1). Budgeted income statement. WallStreetMojo. Retrieved July 19, 2022, from https://www.wallstreetmojo.com/budgeted-income-statement/
Note:
This article is written based on University of The People Managerial Accounting (BUS 5110) written assignment by Fristy Tania in July 2022
