century 21 accounting © 2009 south-western, cengage learning lesson 14-1 budget planning
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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 14-1
BUDGET FUNCTIONSBUDGET FUNCTIONS
Planning Operational control Department coordination
page 413
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 14-1
BUDGET PERIODBUDGET PERIOD
Long-range budget Annual budget Quarterly budget Monthly budget
page 413
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 14-1
SOURCES OF BUDGET INFORMATIONSOURCES OF BUDGET INFORMATION
Company records General economic information Company staff and managers Good judgment
page 414
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 14-1
COMPARATIVE INCOME STATEMENTCOMPARATIVE INCOME STATEMENT page 415
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 14-1
INTERPRETING THE COMPARATIVE INTERPRETING THE COMPARATIVE INCOME STATEMENTINCOME STATEMENT page 416
Compare the percentage change in expenses or costs to the percentage change in sales. Effect on net income
If the % increase in expenses or costs > the % increase in sales, net income decreases.
Unfavorable
If the % increase in expenses or costs < the % increase in sales, net income increases.
Favorable
If the % decrease in expenses or costs > the % decrease in sales, net income increases.
Favorable
If the % decrease in expenses or costs < the % decrease in sales, net income decreases.
Unfavorable
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 14-1
TERMS REVIEWTERMS REVIEW
budgeting budget budget period comparative income statement
page 417
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 14-2LESSON 14-2
Budgeted Income Statement
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 14-2
1. Enter actual and projected units.
2. Determine sales percentages.
6. Calculate total net sales.
3. Calculate unit sales volume.
4. Enter unit sales prices.
5. Calculate projected net sales.
SALES BUDGET SCHEDULESALES BUDGET SCHEDULE page 419
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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 14-2
1. Calculate ending inventory for each quarter.
2. Enter projected unit sales.
3. Determine total units needed.
4. Enter beginning inventory.
6. Enter unit cost.
5. Determine purchases.
7. Determine cost of purchases.
PURCHASES BUDGET SCHEDULEPURCHASES BUDGET SCHEDULE page 420
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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 14-2
SELLING EXPENSES SELLING EXPENSES BUDGET SCHEDULEBUDGET SCHEDULE page 421
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 14-2
ADMINISTRATIVE EXPENSESADMINISTRATIVE EXPENSESBUDGET SCHEDULEBUDGET SCHEDULE page 423
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 14-2
OTHER REVENUE AND EXPENSES OTHER REVENUE AND EXPENSES BUDGET SCHEDULEBUDGET SCHEDULE page 424
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 14-2
1. Beginning inventory: 39,200 units $3.30 = $129,360
2. Ending inventory: 42,100 units $3.40 = $143,140
BUDGETED INCOME STATEMENTBUDGETED INCOME STATEMENT page 425
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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 14-2
Net Income before Federal Income Tax
Tax Rate =Federal IncomeTax Expense
15% of net income before taxes, zero to $50,000.00.
25% of net income before taxes less $5,000.00, $50,001.00 to $75,000.00.
34% of net income before taxes less $11,750.00, $75,001.00 to $100,000.00.
39% of net income before taxes less $16,750.00, $100,001.00 to $335,000.00.
CALCULATING FEDERAL CALCULATING FEDERAL INCOME TAX EXPENSEINCOME TAX EXPENSE page 425
Calculating Federal Income Tax Expense
$125,970 39% less $16,750 = $32,378.30rounded to $32,380
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 14-2
TERMS REVIEWTERMS REVIEW
sales budget schedule purchases budget schedule selling expenses budget schedule administrative expenses budget schedule other revenue and expenses budget schedule budgeted income statement
page 426
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
LESSON 14-3LESSON 14-3
Cash Budgets and Performance Reports
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 14-3
CASH RECEIPTS BUDGET SCHEDULECASH RECEIPTS BUDGET SCHEDULE page 427
Collection Percentage
First QuarterNet Sales
=Second QuarterCash Receipts
19.4% $488,000 = $94,672, rounded to $94,670
Collection Percentage
Second Quarter Sales
=Second QuarterCash Receipts
80.0% $552,300 = $441,840
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CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 14-3
CASH PAYMENTS BUDGET SCHEDULECASH PAYMENTS BUDGET SCHEDULE page 429
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 14-3
CASH BUDGETCASH BUDGET page 430
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 14-3
PERFORMANCE REPORTPERFORMANCE REPORT page 431
CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning
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LESSON 14-3
PERFORMANCE REPORTPERFORMANCE REPORT page 431