The budgeted balance sheet includes all the line items of a general balance sheet with the only exception that it projects how the company balance sheet will appear during future budgeting periods. It is created from some supporting calculations. The accuracy of these calculations can differ depending on the inputs’ realism to the budget model. This balance sheet is very helpful to test whether a company’s projected financial position seems reasonable.
A budgeted balance sheet refers to a report that management uses for assuming the levels of assets, liabilities, and equity depending on the budget for the present accounting period. It can be said in another way that it shows where all the accounts will be at the end of an accounting period if the company’s actual performance matches the budgeted calculations. Generally, preparing this report is the last stage in the process of a master budget’s finalization.
Usually, at the end of each accounting period, management begins planning a master budget for the next accounting period. This master budget is built up of many smaller budgets for cash, sales, general expenses, and selling expenses. All these budgets are combined to prepare one big, descriptive financial plan.
Management will see how the financial statements of the organization will look like if the organization can attain their goals for that period after the master budget is prepared. It is the time when the organization prepares the budgeted balance sheet and income statement.
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