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Chapter 8. Budgeting and Planning Cycle > Moving from the Pro Forma to the Budg...

Moving from the Pro Forma to the Budget

A pro forma statement can be translated into financial budgets for the upcoming year. The pro forma statement is the forecast. Budgets are used to plan, coordinate, and control a company's operations. The budgeting time period is a matter of judgment. A business may develop annual, quarterly, or monthly budgets depending on such factors as its information needs, its sales patterns (for example, seasonal peaks and valleys versus a steady trend), its operational methods, and its financial structure.

Suppose that Cummins Printing wants to create a quarterly operating budget for 2005, based on its pro forma income statement for that year. The quarterly budget is shown in Figure 8.7.


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