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income statement. The financial budget includes the budgeted balance sheet, capital expenditure
budget, and other budgets used in financial management. A large part of the financial budget is
determined by the operating budget and the beginning balance sheet.
Exhibit 11.5 is a simplified budget for C&G‟s Gift Shop. It is prepared on a monthly basis. The
numbers after the following subheadings refer to the applicable lines in the budget.
Sales Budget (1-3)
The sales budget or revenue budget is the first budget to be prepared. It is usually the most important
budget because so many other budgets are directly related to sales and are therefore largely derived
from the sales budget. Inventory budgets, production budgets, personnel budgets, marketing budgets,
administrative budgets, and other budget areas are all affected significantly by the level of overall
sales volume expected.
Exhibits 11.5 C&C‟s Gift Shop: 2009 master budget.