Budgeted Income Statement

A budgeted income statement is a forward-looking plan that shows a company’s expected revenues, costs, and profits for a specific accounting period.

These estimates come from past data, current market trends, and future growth plans.

Consider Prim Corporation, which prepares a budgeted income statement for the next quarter.

The company starts with its sales budget and estimates total sales revenue of two million dollars.

Next, it looks at the production and materials budgets, which show how many units the company needs to produce and estimate its cost of goods sold at one million two hundred thousand dollars.

The difference leads to a gross profit of eight hundred thousand dollars.

Next, Prim Corporation uses its operating budget to estimate other expenses, which add up to five hundred thousand dollars.

Subtracting these operating expenses from gross profit gives an operating income of three hundred thousand dollars.

Finally, the company estimates interest and taxes for the quarter at fifty thousand dollars each. After subtracting these amounts, Prim Corporation expects a final net income figure of two hundred thousand dollars.

This process helps companies check their profitability and control costs.