What is the Difference Between Cash Budget and Projected Income Statement?

The main difference between a cash budget and a projected income statement lies in their focus and the timing of the financial information they present. Here are the key differences:

1. Focus: A cash budget is concerned with the estimates of cash inflows and outflows for a specific accounting period, while a projected income statement provides an estimation of revenues and costs, focusing on the company's financial performance.
2. Timing: In a cash budget, revenues and expenses are included in the months in which cash is actually received or disbursed, whereas in an income statement, revenues and expenses are included in the month in which the corresponding sale took place, which is usually not the same month in which cash is received.
3. Purpose: The purpose of the cash budget is to estimate the liquidity position of the company, while the purpose of the projected income statement is to estimate the profitability of the company.
4. Net Result: The net result of the master budget, which includes both the cash budget and the projected income statement, is referred to as net profit or net loss. In contrast, the net result of the cash budget is referred to as surplus or deficit.

In summary, a cash budget and a projected income statement serve different purposes and present financial information at different times. The cash budget focuses on the company's liquidity, while the projected income statement concentrates on the company's financial performance. Both are essential components of a company's financial planning and management.

Comparative Table: Cash Budget vs Projected Income Statement

The main differences between a cash budget and a projected income statement are their purpose and the elements they focus on. Here is a table summarizing the differences:

Both the cash budget and the projected income statement are prepared as part of the master budget, providing forecasts regarding the liquidity and profitability of the company. However, the cash budget focuses on the company's cash position, while the projected income statement focuses on the company's financial performance, such as revenues, expenses, profits, or losses over a specific period of time.