Page 895 - Accounting Principles (A Business Perspective)

23. Budgeting for planning and control

each of the first two quarters of 2010 (shown in Exhibit 194). The accrual for the current quarter is added (Exhibit
184). Thus, the balance on 2010 March 31, is USD 54,000, calculated as (USD 100,000 - USD 50,000 + USD
4,000). The balance on 2010 June 30, is USD 48,000, calculated as (USD 54,000 - USD 50,000 + USD 44,000).

On June 30, the balance equals the accrual for the current year, USD 4,000 for the first quarter and USD 44,000
for the second quarter.
Leed Company
Analysis of accounts Credited for Purchases and costs Accumulated
materials operating depreciation
For quarters ending March31 and 2010 June 30
Total debits Accounts payable Accrued Prepaid Building Equipment
liabilities expenses
payable
Beginning balances, January $ 80,000 $ 160,000 $ 20,000* $ 400,000 $ 180,000
1 (per Exhibit 188)
Purchases or operating costs,
quarter ending March 31
(credits made to accounts
shown at right):
Direct materials (per Exhibit $ 35,000* $ 35,000
190)
Direct labor (per Exhibit 183) 150,000* $150,000
Manufacturing overhead (per 100,000* 16,000 60,000 $ 6,000 $ 5,000 $ 13,000
Exhibit 183 and above
schedules)
Selling and administrative 140,000* 5,000 130,000 2,000 1,000 2,000
expenses (perExhibit 184 and
above schedules)
Total $425,000 $ 56,000 $ 340,000 $ 8,000 $ 6,000 $ 15,000
Total including January 1 $136,000 $ 500,000 $ 12,000* $ 406,000 $ 195,000
balances
Planned cash payments 80,000* 330,000*
(debits made to accounts
shown)
Planned balances, March 31 $ 56,000 $ 170,000 $12,000* $ 406,000 $ 195,000
Purchases or operating costs,
quarter ending June 30
(credits made to accounts
shown at right):
Direct materials (per Exhibit $ 50,000* $ 50,000
190)
Direct labor (per Exhibit 183) 150,000* $ 150,000
Manufacturing overhead (per 100,000* 13,000 64,000 $ 5,000 $ 5,000 $ 13,000
Exhibit 183 and above
schedules)
Selling and administrative 170,000* 10,000 154,000 3,000 1,000 2,000
expenses (per Exhibit 184
and above schedules)
Total $470,000 $ 73,000 $368,000 $ 8,000 $ 6,000 $ 15,000
Total including March 31 $129,000 $538,000 $ 4,000* $412,000 $210,000
balances
Planned cash payments 56,000* 354,000* 10,000*
(debits made to accounts
shown)
Planned balances, June 30 $ 73,000 $ 184,000 $ 14,000* $ 412,000 $210,000
*Debit balance or debit to
account.
Exhibit 191: Leed Company: Analyses of accounts credited for materials purchases and operating costs
Cash budget After the preceding analyses have been prepared, sufficient information is available to prepare
the cash budget and compute the balance in the Cash account on March 31 and 2010 June 30. Preparing a cash

budget requires information about cash receipts and cash disbursements.

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