1. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 14-1 Budget Planning

2. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 2 LESSON 14-1 BUDGET FUNCTIONS Planning Operational control Department coordination page 413

3. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 3 LESSON 14-1 BUDGET PERIOD Long-range budget Annual budget Quarterly budget Monthly budget page 413

4. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 4 LESSON 14-1 SOURCES OF BUDGET INFORMATION Company records General economic information Company staff and managers Good judgment page 414

5. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 5 LESSON 14-1 COMPARATIVE INCOME STATEMENT page 415

6. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 6 LESSON 14-1 INTERPRETING THE COMPARATIVE INCOME 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

7. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 7 LESSON 14-1 TERMS REVIEW budgeting budget budget period comparative income statement page 417

8. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 14-2 Budgeted Income Statement

9. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 9 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 SCHEDULE page 419 1 6 3 5 4 2

10. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 10 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 SCHEDULE page 420 1 2 3 4 5 7 6

11. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 11 LESSON 14-2 SELLING EXPENSES BUDGET SCHEDULE page 421

12. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 12 LESSON 14-2 ADMINISTRATIVE EXPENSES BUDGET SCHEDULE page 423

13. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 13 LESSON 14-2 OTHER REVENUE AND EXPENSES BUDGET SCHEDULE page 424

14. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 14 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 STATEMENT page 425 1 2

15. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 15 LESSON 14-2 Net Income before Federal Income Tax Tax Rate= Federal Income Tax 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 INCOME TAX EXPENSE page 425 Calculating Federal Income Tax Expense $125,97039% less $16,750=$32,378.30 rounded to $32,380 

16. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 16 LESSON 14-2 TERMS 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

17. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning LESSON 14-3 Cash Budgets and Performance Reports

18. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 18 LESSON 14-3 CASH RECEIPTS BUDGET SCHEDULE page 427 Collection Percentage First Quarter Net Sales = Second Quarter Cash Receipts  19.4% $488,000 = $94,672,  rounded to $94,670 Collection Percentage Second Quarter Sales = Second Quarter Cash Receipts  80.0% $552,300 = $441,840  1 1 2 2

19. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 19 LESSON 14-3 CASH PAYMENTS BUDGET SCHEDULE page 429

20. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 20 LESSON 14-3 CASH BUDGET page 430

21. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 21 LESSON 14-3 PERFORMANCE REPORT page 431

22. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 22 LESSON 14-3 PERFORMANCE REPORT page 431

23. CENTURY 21 ACCOUNTING © 2009 South-Western, Cengage Learning 23 LESSON 14-3 TERMS REVIEW cash receipts budget schedule cash payments budget schedule cash budget performance report page 433