 The budgeted income statement, which is either the last operating budget or one of the first financial budgets depending on which book you are referencing, is created with data from other budgets. As you can see here, we'll use data from the sales budget, the cost of goods sold budget, operating expenses budget, and the cash budget. The budgeted income statement is the tenth budget completed in the master budget process. To start with, we will pull the sales revenue data from the sales budget. In Excel, we would link the sales in the income statement to the related sales in the sales budget. Then we would pull the cost of goods sold amount from the cost of goods sold budget. Again in Excel, we would link the sales and the income statement to the related sales in the cost, in the cost of goods sold budget. The difference between budgeted sales revenue and budgeted costs of goods sold is the budgeted gross profit. Then we will pull operating expenses from the operating expenses budget and subtract the amount from the budgeted gross profit amount to arrive at budgeted operating income. In Excel, we would link the sales and the income statement to the related sales in the operating expenses budget. Finally, we will pull interest expense from the cash budget and subtract the amount of interest expense from budgeted operating expense to arrive at budgeted income before taxes. Income tax expense is usually just a percentage of income before taxes. In this example, I've assumed 30%. So 30% of income before taxes is reported as income tax expense and then deducted from income before taxes to arrive at budgeted net income. As I've repeatedly mentioned, this budget is best built by linking sales in the budgeted income statement to the related sales in the budgets from where the data is retrieved.