Chad has been making skateboards for his friends and now has more orders than he can handle. He has decided to turn the business into a full-time venture and plans to develop the company into a Fortune 500 company. However, he does not have enough cash

Question

and has decided to apply for a Small Business Administration loan. The loan officer informed him that she will need to see projected financial statements with supporting schedules for the next 12 months of operations. a. Identify the financial statements and supporting schedules you believe are appropriate. b. What information will you need to include in the budgeted financial statements, and where will you get this information?

Answer 1

a. The budgeted income statement, balance sheet, and cash budget are appropriate. The budgeted income statement can be supported by operating budgets for sales, production, direct materials, direct labor, overhead, cost of goods manufactured, cost of goods sold, and selling and administrative expenses. The budgeted balance sheet can be supported by schedules for cash collections from customers, cash payments to suppliers, and the capital expenditures budget. The cash budget can be supported by a combination of schedules and budgets that support the other two statements.

b. For the budgeted income statement, you would need to include revenue and expense data, possibly including sales volume, unit sales prices, production volume, cost per unit, and selling and administrative expenses. This information can be derived from their respective budgets, which are based on a combination of internal and external factors. The budgeted balance sheet would include asset, liability, and owner's equity information. Specifically, it should show the assets owned, as well as those to be acquired, debts (current and anticipated), and current as well as prospective owner's equity items. Much of these data would again come from the supporting budgets within the master budget.