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Budgeting - Examples

The document provides information to prepare cash budgets for three different companies over multiple months. 1) For the first company, cash on hand as of April 1st is given along with sales, purchase, wage, and expense data for March-June to estimate the cash position over that period. 2) For the second company, sales, purchase, and wage data is provided for August-December to prepare a cash budget for October-December when they will manufacture for stock. 3) For the third company, sales, purchase, and expense data is provided for January-March to prepare a cash budget for April-May. The document outlines the company's credit terms and payment schedules.

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47 views

Budgeting - Examples

The document provides information to prepare cash budgets for three different companies over multiple months. 1) For the first company, cash on hand as of April 1st is given along with sales, purchase, wage, and expense data for March-June to estimate the cash position over that period. 2) For the second company, sales, purchase, and wage data is provided for August-December to prepare a cash budget for October-December when they will manufacture for stock. 3) For the third company, sales, purchase, and expense data is provided for January-March to prepare a cash budget for April-May. The document outlines the company's credit terms and payment schedules.

Uploaded by

sunil.ct
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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1.

A company is expecting to have AED 25000 cash in hand on 1st April 2016 and it requires you to
prepare an estimate of cash position during the three month, April to June 2016. The following
information is supplied to you.

Months Sales(AED) Purchase(AED) Wages(AED) Expenses(AED)


March 70,000 40,000 8,000 6,000
April 92,000 52,000 9,000 7,000
May 100,000 60,000 10,000 8,000
June 120,000 55,000 12,000 9,000
Other information:
1. Period of credit allowed by suppliers – one month
2. 25% of sale is for cash and the period of credit allowed to customers for credit sale is one month.
3. Delay in payment of wages and expenses – one month.
4. Income tax of AED 25,000 is to be paid in June 2016.

2. San Jos Co. wishes to approach the bankers for temporary overdraft facility for the period from October
2016 to December 2016. During the period of these three months, the firm will be manufacturing mostly
for stock. You are required to prepare a cash budget for the above period.
Month Sales ($) Purchases ($) Wages ($)
August 460,000 449,600 34,000
September 484,000 288,000 25,000
October 316,000 686,000 18,000
November 548,000 392,000 20,000
December 352,000 436,000 20,000
(a) All sales are on credit. 50% of credit sales are realized in the month following the sales and
remaining 50% in the second following.
(b) Creditors are paid in the month following the month of purchase
(c) Estimated cash as on 1‐10‐2016 is $35,000.
3. From the following information, prepare cash budget of a business firm for the months of April and May.
(a) The firm makes 20 per cent cash sales. Credit sales are collected 40, 30 and 25 per cent in the month
of sales, month after and second month after sales, respectively. The remaining 5 per cent becomes bad
debts.
(b) The firm is entitled to 2 per cent discount on all its purchases if bills are paid within 15 days and the
firm avails of all such discounts. Monthly purchases are made in two equal lots on fortnightly basis.
(c) Expenses are paid at a ratio of 30:70 in the same month and the following respectively.
(e) Other data is:

Month Sales Purchases Expenses


Jan 100,00 80,000 30,000
0
Feb 120,00 70,000 25,000
0
March 150,00 100,000 30,000
0
April (Budgeted) 170,00 120,000 20,000
0
May (Budgeted) 140,00 110,000 20,000
0

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