Sales Budget The beginning point for budgeting, the sales budget, is merely a summary of expected...

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Sales Budget The beginning point for budgeting, the sales budget, is merely a summary of expected sales for the year. It is one of the simplest schedules in the master budget. Connected to it and immediately following it is the cash collections budget. Assumptions are made (usually based on historical experience) regarding when sales revenues will be collected, and then those collections are placed into the appropriate time period as expected cash receipts. This enables the summarization of cash collections by time period a critical need for projecting cash inflows. In the example below, sales in units are multiplied by the number of units sold to arrive at sales in dollars. Then, based on assumptions regarding collections timing, those sales dollars are channeled into the time period when they will be collected. Note that 70% of sales are to be collected in the period of sale and 30% in the period following, and verify a couple of collections amounts. (Example: of the $400,000 sales shown in Q1, $280,000 [70%] is collected in Q1, $120,000 [30%] in Q2.) Note that beginning accounts receivable is collected in Q1. The uncollected portion of Q4 sales becomes accounts receivable on the budgeted ending balance sheet to be collected in Q1 of the next year The income statement and several other detailed budget schedules depend on the sales budget (refer to the diagram on the preceding page). Q1 Q2 Q3 Q4 Total Sales Budgeted sales in units 5,000 Selling price per unit 80 15,000 80 20,000 80 10,000 80 50,000 80 Total sales in dollars $400,000 $1,200,000 $1,600,000 $ 800,000 $4,000,000 Percentage of sales collected in period of sale Percentage of sales collected in period following sale Collections Beginning accts receivable $180,000 70% 30% $ 180,000 Sales, Quarter 1 280,000 $ 120,000 400,000 Sales, Quarter 2 840,000 $360,000 1,200,000 Sales, Quarter 3 1,120,000 $ 480,000 1,600,000 Sales, Quarter 4 560,000 560,000 Total $460,000 $960,000 $1,480,000 $1,040,000 $3,940,000 Sales Budget The beginning point for budgeting, the sales budget, is merely a summary of expected sales for the year. It is one of the simplest schedules in the master budget. Connected to it and immediately following it is the cash collections budget. Assumptions are made (usually based on historical experience) regarding when sales revenues will be collected, and then those collections are placed into the appropriate time period as expected cash receipts. This enables the summarization of cash collections by time period a critical need for projecting cash inflows. In the example below, sales in units are multiplied by the number of units sold to arrive at sales in dollars. Then, based on assumptions regarding collections timing, those sales dollars are channeled into the time period when they will be collected. Note that 70% of sales are to be collected in the period of sale and 30% in the period following, and verify a couple of collections amounts. (Example: of the $400,000 sales shown in Q1, $280,000 [70%] is collected in Q1, $120,000 [30%] in Q2.) Note that beginning accounts receivable is collected in Q1. The uncollected portion of Q4 sales becomes accounts receivable on the budgeted ending balance sheet to be collected in Q1 of the next year The income statement and several other detailed budget schedules depend on the sales budget (refer to the diagram on the preceding page). Q1 Q2 Q3 Q4 Total Sales Budgeted sales in units 5,000 Selling price per unit 80 15,000 80 20,000 80 10,000 80 50,000 80 Total sales in dollars $400,000 $1,200,000 $1,600,000 $ 800,000 $4,000,000 Percentage of sales collected in period of sale Percentage of sales collected in period following sale Collections Beginning accts receivable $180,000 70% 30% $ 180,000 Sales, Quarter 1 280,000 $ 120,000 400,000 Sales, Quarter 2 840,000 $360,000 1,200,000 Sales, Quarter 3 1,120,000 $ 480,000 1,600,000 Sales, Quarter 4 560,000 560,000 Total $460,000 $960,000 $1,480,000 $1,040,000 $3,940,000