![]() ![]() Next, sales estimates are made, based on historical sales information and estimates from the sales department. ![]() It begins with decisions about which products and services will be offered, as well as whether sales will be made into new geographic regions. Construction of a Budgetīusinesses typically create budgets in accordance with a specific timeline. Budgeting software also contains controls that prevent a budget model from being tampered with by an unauthorized user. Many budgets are prepared on electronic spreadsheets, though larger businesses prefer to use budget-specific software that is more structured and so is less liable to contain computational errors. This should be constructed in a top-down format, so a master budget contains a summary of the entire budget document, while separate documents containing supporting budgets roll up into the master budget and provide additional detail to users. Structure of a BudgetĪt the most minimal level, a budget contains an estimated income statement for future periods. A more complex budget contains a sales forecast, the cost of goods sold and expenditures needed to support the projected sales, estimates of working capital requirements, fixed asset purchases, a cash flow forecast, and an estimate of financing needs. ![]() It is used for planning and performance measurement purposes, which can involve spending for fixed assets, rolling out new products, training employees, setting up bonus plans, controlling operations, and so forth. A budget is used to forecast the financial results and financial position of an entity for a future period. ![]()
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