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The operating budget comprises key components including sales, inventory, purchases, cost of goods sold, and operating expenses, all contributing to a budgeted income statement. In the example of Gregg Stus company, budgets are prepared for four months: April, May, June, and July. Sales information is derived from marketing and advertising departments, forecasting anticipated sales dollar amounts. Companies may differentiate between cash sales and credit sales; purchases made with credit cards are considered credit sales, reflecting a deferred payment rather than immediate cash collection. This breakdown aids in understanding the financial flow and operational planning.
