FINANCIAL PLANNING TOOLS AND CONCEPTS

PLANNING
Is an important aspect of the firm’s
operations because it provides road maps for
guiding, coordinating, and controlling the
firm’s actions to achieve its objectives.
(Gitman and Zuller, 2012)
DIFFERENT TYPES OF PLANNING
 Financial planning refers to the process of
determining the best uses of the financial resources
of an organization to attain its predetermined
objectives, and the procurement of the required
funds at the least cost.
 Corporate Planning is defined as a formal and
systematic managerial process, organized by
responsibility, time and information, to ensure that
operational planning, project planning, and
strategic planning are carried out regularly to
enable top management to direct and control the
future of the enterprise.
DIFFERENT TYPES OF PLANNING

 Strategic Planning is the process of making

decisions which will tend to optimize the
organization’s future position despite changes in
future environment.
 Project planning or capital expenditure planning
refers to working out the execution of an action
outside the scope of current operations such as
acquisition of another company, a new plant, a new
market, or adoption of a new system.
 Operational Planning refers to a forward planning
of existing operations
THE FINANCIAL
PLANNING PROCESS

 Where are we now?

This requires analysis of the

current financial statements of
a company. This is done to
detect areas of strengths and
weaknesses as indicated by
the measures of liquidity or
short-term solvency,
profitability, and stability.
THE FINANCIAL
PLANNING PROCESS

 How did we get there?

This requires an interpretation

of historical data which may
reveal the causes of current
financial stability or difficulty
such as sufficiency or
insufficiency of fund inflows
from operations, inability to
plough back earnings by
declaring the greater portion
annual net income as
dividends, and unprofitable
operations of some sub-units.
THE FINANCIAL
PLANNING PROCESS

 Where do we want to go?

The different alternatives are

evaluated, and the best
choice is made considering
the projected outcomes.
BUDGETING
Is the process where an
entity translates their
operations in quantitative
terms, usually monetary, to
represent it as its planned
operations, activities, and
production for a specific
time period consideration.
OBJECTIVES OF BUDGETING

1. A budget should be able to provide a realistic estimate of

income and expenses.
2. A budget should provide a coordinated plan of action for the
entity.
3. A budget should serve as a control mechanism that can be
used in performance evaluation by being able to check
results and suggest future corrective actions.
4. A budget should provide guidance to management.
5. A budget should help in decision-making.
6. A budget should be able to improve communication,
coordination, and harmonious operations within the entity.
BUDGETING HELPS IN

performance
planning coordination
evaluation

promoting
control motivation
positive behavior
BENEFITS OF BUDGETING

It compels managers to think ahead.

It provides an opportunity to reevaluate existing activities and evaluate new ones.

It aids managers in communicating objectives and coordinating actions across the

organization.

It provides benchmarks to evaluate subsequent performance.

MASTER BUDGET

Is regarded as a comprehensive financial

planning tool that highlights operating
budgets, budgeted financial statements, and
a financial plan.
OPERATING BUDGET
Is a budget plan dedicated to
the operations of the entity
such as sales, production, and
operating expenses.
 Sales Budget
 Production Budget
 Purchases Budget
 Direct Labor Budget
 Overhead Budget
 Cost of Sales Budget
 Operating Expenses
Budget
FINANCIAL BUDGET

Is a budget plan dedicated to

the entity’s cash budget,
budgeted financial
statements, and capital
acquisitions.
 Cash Budget
 Capital Acquisitions
Budget
 Budget Financial
Statements
BUDGETING PROCESS
COMPREHENSIVE PROBLEM:
MASTER BUDGET
SALES BUDGET
 C. Alvarez Merchandising is preparing budgets for the quarter ending June 30.
 Budgeted sales for the next five months are: April – 20,000 units; May – 50,000 units; June – 30,000 units;
July – 25,000 units; August – 15,000 units.
 The selling price is P 10.00 per unit.

C. Alvarez Merchandising
Sales Budget
For the period April 1 - June 30, 2022

April May June Quarter 2

Budgeted sales in units 20,000 50,000 30,000 100,000
Multiply by: Selling price per unit 10.00 10.00 10.00 10.00
Budgeted sales revenue 200,000.00 500,000.00 300,000.00 1,000,000.00
SCHEDULE OF EXPECTED CASH COLLECTIONS

 All sales are on account.

 C. Alvarez’ collection pattern is: 70% collected on the month of sale, 25% collected on the month
following sale, 5% uncollected
 The March 31 accounts receivable balance of P30,000.00 will be collected in full.
 C. Alvarez Merchandising
Sales Budget
SCHEDULE OF EXPECTED CASH COLLECTIONS
For the period April 1 - June 30, 2022

April May June Quarter 2

Budgeted sales in units 20,000 50,000 30,000 100,000
Multiply by: Selling price per unit 10.00 10.00 10.00 10.00
Budgeted sales revenue 200,000.00 500,000.00 300,000.00 1,000,000.00

C. Alvarez Merchandising
Schedule of Cash Collections on Sales
For the period April 1 - June 30, 2022

April May June Quarter 2

From Accounts Receivable, March 31 30,000.00 30,000.00
On April Sales
70% x P200,000 140,000.00 140,000.00
25% x P200,000 50,000.00 50,000.00
On May Sales
70% x P500,000 350,000.00 350,000.00
25% x P500,000 125,000.00 125,000.00
On June Sales
70% x P300,000 210,000.00 210,000.00
Total cash collections 170,000.00 400,000.00 335,000.00 905,000.00
PURCHASE BUDGET
 The management of C. Alvarez Merchandising wants ending inventory to be equal to 20% of the following
budgeted sales.
 On March 31, the ending inventory is P40,000.00
 The cost of sales margin is 60%

C. Alvarez Merchandising
Purchase Budget
For the period April 1 - June 30, 2022

April May June Quarter 2 July

Budgeted sales revenue 200,000.00 500,000.00 300,000.00 1,000,000.00 250,000.00

Cost of Sales (60%) 120,000.00 300,000.00 180,000.00 600,000.00

Add: Desired ending inventory 100,000.00 60,000.00 50,000.00 50,000.00 30,000
Total inventory needed 220,000.00 360,000.00 230,000.00 650,000.00 280,000
Less: Beginning inventory 40,000.00 100,000.00 60,000.00 40,000.00 50,000
Total purchases needed 180,000.00 260,000.00 170,000.00 610,000.00 230,000
SCHEDULE OF CASH DISBURSEMENT ON PURCHASES

 One-half of the month’s purchases is paid on the month of purchase; the other half is paid on the following month.
 The March 31 accounts payable balance is P12,000.00

C. Alvarez Merchandising
Purchase Budget
For the period April 1 - June 30, 2022

April May June Quarter 2 July

Budgeted sales revenue 200,000.00 500,000.00 300,000.00 1,000,000.00 250,000.00

Cost of Sales (60%) 120,000.00 300,000.00 180,000.00 600,000.00

Add: Desired ending inventory 100,000.00 60,000.00 50,000.00 50,000.00 30,000
Total inventory needed 220,000.00 360,000.00 230,000.00 650,000.00 280,000
Less: Beginning inventory 40,000.00 100,000.00 60,000.00 40,000.00 50,000
Total purchases needed 180,000.00 260,000.00 170,000.00 610,000.00 230,000
SCHEDULE OF CASH DISBURSEMENT ON PURCHASES
 One-half of the month’s purchases is paid on the month of purchase; the other half is paid on the
following month.
 The March 31 accounts payable balance is P12,000.00
 Purchase Budget
For the period April 1 - June 30, 2022

April May June Quarter 2 July

SCHEDULE OF CASH DISBURSEMENT ON PURCHASES
Budgeted sales revenue 200,000.00 500,000.00 300,000.00 1,000,000.00 250,000.00

Cost of Sales (60%) 120,000.00 300,000.00 180,000.00 600,000.00

Add: Desired ending inventory 100,000.00 60,000.00 50,000.00 50,000.00 30,000
Total inventory needed 220,000.00 360,000.00 230,000.00 650,000.00 280,000
Less: Beginning inventory 40,000.00 100,000.00 60,000.00 40,000.00 50,000
Total purchases needed 180,000.00 260,000.00 170,000.00 610,000.00 230,000

C. Alvarez Merchandising
Schedule of Cash Disbursements on Purchases
For the period April 1 - June 30, 2022

April May June Quarter 2

From Accounts Payable, March 31 12,000.00 12,000.00
On April material purchases:
50% x P180,000 90,000.00 90,000.00
50% x P180,000 90,000.00 90,000.00
On May material purchases:
50% x P260,000 52,000.00 52,000.00
50% x P260,000 52,000.00 52,000.00
On June material purchases:
50% x P170,000 34,000.00 34,000.00
Total cash disbursements for material purchases 102,000.00 142,000.00 86,000.00 330,000.00
SELLING AND ADMINISTRATIVE EXPENSE BUDGET
 At C. Alvarez, the selling and administrative expense budget is divided into variable and fixed components.
 The variable selling and administrative expenses are P0.50 per unit sold.
 Fixed selling and administrative expenses are P70,000.00 per month.
 The fixed selling and administrative expenses include P10,000.00 in costs – primarily depreciation – that are not
cash outflows of the current month.
C. Alvarez Merchandising
Selling and Administrative Expenses Budget
For the period April 1 - June 30, 2022

April May June Quarter 2

Budgeted sales in units 20,000 50,000 30,000 100,000
Multiply by: Variable S&A rate 0.50 0.50 0.50 0.50
Variable S&A Expenses 10,000.00 25,000.00 15,000.00 50,000.00
Add: Fixed S&A Expenses 70,000.00 70,000.00 70,000.00 210,000.00
Total selling and administrative expenses 80,000.00 95,000.00 85,000.00 260,000.00

Total selling and administrative expenses 80,000.00 95,000.00 85,000.00 260,000.00

Less: Noncash selling and administrative expenses 10,000.00 10,000.00 10,000.00 30,000.00
Total cash disbursements for S&A expenses 70,000.00 85,000.00 75,000.00 230,000.00
CASH BUDGET
 Annual interest rate for all borrowing is 16%.
 Maintains a minimum cash balance of P30,000.
 Borrows on the first day of the month and repays loans on the last day of the quarter.
 Pays a cash dividend of P49,000.00 in April.
 Purchases P143,700.00 of equipment in May and P48,300.00 in June (both purchases paid in cash).
 Has an April 1 cash balance of P40,000.00
CASH BUDGET
C. Alvarez Merchandising
Cash Budget
For the period April 1 - June 30, 2022

April May June Quarter 2

Beginning cash balance 40,000.00 30,000.00 59,300.00 40,000.00
Add: Cash collections made 170,000.00 400,000.00 335,000.00 905,000.00
Total cash available 210,000.00 430,000.00 394,300.00 945,000.00
Less: Cash disbursements on -
Purchases 102,000.00 142,000.00 86,000.00 330,000.00
Selling and administrative expense 70,000.00 85,000.00 75,000.00 230,000.00
Equipment purchase - 143,700.00 48,300.00 192,000.00
Dividends 49,000.00 - - 49,000.00
Total cash disbursements 221,000.00 370,700.00 209,300.00 801,000.00
Excess cash (deficiency in cash) (11,000.00) 59,300.00 185,000.00 144,000.00
Financing needed (payments needed)
Borrowing 41,000.00 - - 41,000.00
Repayments - - (41,000.00) (41,000.00)
Interest - - (1,640.00) (1,640.00)
Total financing needed (payments needed) 41,000.00 - (42,640.00) (1,640.00)
Ending cash balance 30,000.00 59,300.00 142,360.00 142,360.00
BUDGETED INCOME STATEMENT

C. Alvarez Merchandising
Budgeted Income Statement
For the period April 1 - June 30, 2022

April May June Quarter 2

Sales 200,000.00 500,000.00 300,000.00 1,000,000.00
Less: Cost of goods sold 120,000.00 300,000.00 180,000.00 600,000.00
Gross Profit 80,000.00 200,000.00 120,000.00 400,000.00
Less: Selling and Administrative Expenses 80,000.00 95,000.00 85,000.00 260,000.00
Operating Income - 105,000.00 35,000.00 140,000.00
Less: Interest Expense - - 1,640.00 1,640.00
Net Income - 105,000.00 33,360.00 138,360.00
BUDGETED STATEMENT OF RETAINED EARNINGS
C. Alvarez reported the following account balances prior to preparing its budgeted financial statements.
 Retained Earnings – P146,150.00 (April 1)

C. Alvarez Merchandising
Budgeted Statement of Retained Earnings
For the period April 1 - June 30, 2022

April May June Quarter 2

Retained Earnings, beginning 146,150.00 97,150.00 202,150.00 146,150.00
Add: Net income - 105,000.00 33,360.00 138,360.00
Less: Dividends declared and paid 49,000.00 - - 49,000.00
Retained Earnings, ending 97,150.00 202,150.00 235,510.00 235,510.00
BUDGETED STATEMENT OF FINANCIAL POSITION
C. Alvarez reported the following account balances prior to preparing its budgeted financial statements.
 Supplies – P43,150.00
 Land - P50,000.00
 Share Capital – P200,000.00
 Retained Earnings – P146,150.00 (April 1)
 Equipment – P175,000.00
 BUDGETED STATEMENT OF FINANCIAL POSITION

Merchandising
C. Alvarez Merchandising
BalanceBudgeted
Sheet Balance Sheet
022 June 30, 2022 C. Alvarez Merchandising
Cash Budget
For the period April 1 - June 30, 2022
Quarter 2 Quarter 2
ASSETS April May June Quarter 2
Beginning cash balance 40,000.00 30,000.00 59,300.00 40,000.00
Cash 142,360.00 142,360.00
Add: Cash collections made 170,000.00 400,000.00 335,000.00 905,000.00
Receivable
Accounts Receivable 75,000.00 Total75,000.00
cash available 210,000.00 430,000.00 394,300.00 945,000.00
Less: Cash disbursements on -
Supplies 43,150.00 43,150.00
Purchases 102,000.00 142,000.00 86,000.00 330,000.00
y Inventory 50,000.00 50,000.00
Selling and administrative expense 70,000.00 85,000.00 75,000.00 230,000.00
Land 50,000.00 50,000.00
Equipment purchase - 143,700.00 48,300.00 192,000.00
Dividends 49,000.00 - - 49,000.00
nt Equipment 367,000.00 367,000.00
Total cash disbursements 221,000.00 370,700.00 209,300.00 801,000.00
assets Total assets 727,510.00 727,510.00
Excess cash (deficiency in cash) (11,000.00) 59,300.00 185,000.00 144,000.00
Financing needed (payments needed)
Borrowing 41,000.00 - - 41,000.00
IES ANDLIABILITIES
EQUITY AND EQUITY Repayments - - (41,000.00) (41,000.00)
Interest - - (1,640.00) (1,640.00)
s PayableAccounts Payable 292,000.00 292,000.00
Total financing needed (payments needed) 41,000.00 - (42,640.00) (1,640.00)
n Stock Common Stock 200,000.00 200,000.00
Ending cash balance 30,000.00 59,300.00 142,360.00 142,360.00
EarningsRetained Earnings 235,510.00 235,510.00
liabilities and
Total
equity
liabilities and equity 727,510.00 727,510.00
 BUDGETED STATEMENT OF FINANCIAL POSITION
C. Alvarez Merchandising
Budgeted Schedule of Accounts Receivable
Merchandising
C. Alvarez Merchandising For the period April 1 - June 30, 2022
BalanceBudgeted
Sheet Balance Sheet
April May June Quarter 2
022 June 30, 2022 Accounts Receivable, beginning 30,000.00 50,000.00 125,000.00 30,000.00
Add: Credit Sales 200,000.00 500,000.00 300,000.00 1,000,000.00
Less: Collections on accounts receivable 170,000.00 400,000.00 335,000.00 905,000.00
Quarter 2 Quarter 2
Accounts Receivable, ending 60,000.00 150,000.00 90,000.00 125,000.00
ASSETS Less: Bad debts 10,000.00 25,000.00 15,000.00 50,000.00
Cash 142,360.00 Net realizable value of accounts receivable
142,360.00 50,000.00 125,000.00 75,000.00 75,000.00

Receivable
Accounts Receivable 75,000.00 75,000.00
C. Alvarez Merchandising
Schedule of Cash Collections on Sales
Supplies 43,150.00 For the 43,150.00
period April 1 - June 30, 2022
y Inventory 50,000.00 50,000.00
Land 50,000.00 50,000.00 April May June Quarter 2
From Accounts Receivable, March 31 30,000.00 30,000.00
nt Equipment 367,000.00 367,000.00
On April Sales
assets Total assets 727,510.00 70% x P200,000
727,510.00 140,000.00 140,000.00
25% x P200,000 50,000.00 50,000.00
On May Sales
IES ANDLIABILITIES
EQUITY AND EQUITY 70% x P500,000 350,000.00 350,000.00
25% x P500,000 125,000.00 125,000.00
s PayableAccounts Payable 292,000.00 292,000.00
On June Sales
n Stock Common Stock 200,000.00 70%200,000.00
x P300,000 210,000.00 210,000.00
Total cash collections 170,000.00 400,000.00 335,000.00 905,000.00
EarningsRetained Earnings 235,510.00 235,510.00
liabilities and
Total
equity
liabilities and equity 727,510.00 727,510.00
 C. Alvarez’ collection pattern is: 70% collected on the month of
sale, 25% collected on the month following sale, 5% uncollected
 BUDGETED STATEMENT OF FINANCIAL POSITION

Merchandising
C. Alvarez Merchandising
BalanceBudgeted
Sheet Balance Sheet
022 June 30, 2022
C. Alvarez reported the following account
Quarter 2 Quarter 2
ASSETS
balances prior to preparing its budgeted
Cash 142,360.00 142,360.00 financial statements.
 Supplies – P43,150.00
Receivable
Accounts Receivable 75,000.00 75,000.00
Supplies 43,150.00 43,150.00  Land - P50,000.00
y Inventory 50,000.00 50,000.00  Share Capital – P200,000.00
Land 50,000.00 50,000.00  Retained Earnings – P146,150.00 (April 1)
nt Equipment 367,000.00 367,000.00  Equipment – P175,000.00
assets Total assets 727,510.00 727,510.00

IES ANDLIABILITIES
EQUITY AND EQUITY
s PayableAccounts Payable 292,000.00 292,000.00
n Stock Common Stock 200,000.00 200,000.00
EarningsRetained Earnings 235,510.00 235,510.00
liabilities and
Total
equity
liabilities and equity 727,510.00 727,510.00
 BUDGETED STATEMENT OF FINANCIAL POSITION

Merchandising
C. Alvarez Merchandising
BalanceBudgeted
Sheet Balance Sheet
022 June 30, 2022

Quarter 2 Quarter 2
ASSETS
Cash 142,360.00 142,360.00
C. Alvarez Merchandising
Receivable
Accounts Receivable 75,000.00 75,000.00
Purchase Budget
For the period April 1 - June 30, 2022
Supplies 43,150.00 43,150.00
y Inventory 50,000.00 50,000.00 April May June Quarter 2
Land 50,000.00 50,000.00
Budgeted sales revenue 200,000.00 500,000.00 300,000.00 1,000,000.00
nt Equipment 367,000.00 367,000.00
Cost of Sales (60%) 120,000.00 300,000.00 180,000.00 600,000.00
assets Total assets 727,510.00 727,510.00
Add: Desired ending inventory 100,000.00 60,000.00 50,000.00 50,000.00
Total inventory needed 220,000.00 360,000.00 230,000.00 650,000.00
Less: Beginning inventory 40,000.00 100,000.00 60,000.00 40,000.00
IES ANDLIABILITIES
EQUITY AND EQUITY Total purchases needed 180,000.00 260,000.00 170,000.00 610,000.00
s PayableAccounts Payable 292,000.00 292,000.00
n Stock Common Stock 200,000.00 200,000.00
EarningsRetained Earnings 235,510.00 235,510.00
liabilities and
Total
equity
liabilities and equity 727,510.00 727,510.00
 BUDGETED STATEMENT OF FINANCIAL POSITION

Merchandising
C. Alvarez Merchandising
BalanceBudgeted
Sheet Balance Sheet
022 June 30, 2022
C. Alvarez reported the following account
Quarter 2 Quarter 2
ASSETS
balances prior to preparing its budgeted
Cash 142,360.00 142,360.00 financial statements.
 Supplies – P43,150.00
Receivable
Accounts Receivable 75,000.00 75,000.00
Supplies 43,150.00 43,150.00  Land - P50,000.00
y Inventory 50,000.00 50,000.00  Share Capital – P200,000.00
Land 50,000.00 50,000.00  Retained Earnings – P146,150.00 (April 1)
nt Equipment 367,000.00 367,000.00  Equipment – P175,000.00
assets Total assets 727,510.00 727,510.00

IES ANDLIABILITIES
EQUITY AND EQUITY
s PayableAccounts Payable 292,000.00 292,000.00
n Stock Common Stock 200,000.00 200,000.00
EarningsRetained Earnings 235,510.00 235,510.00
liabilities and
Total
equity
liabilities and equity 727,510.00 727,510.00
 BUDGETED STATEMENT OF FINANCIAL POSITION

Merchandising
C. Alvarez Merchandising
BalanceBudgeted
Sheet Balance Sheet
022 June 30, 2022 C. Alvarez reported the following account
balances prior to preparing its budgeted
Quarter 2 Quarter 2
financial statements.
ASSETS
 Supplies – P43,150.00
Cash 142,360.00 142,360.00
 Land - P50,000.00
Receivable
Accounts Receivable 75,000.00 75,000.00
Supplies 43,150.00 43,150.00
 Share Capital – P200,000.00
y Inventory 50,000.00 50,000.00  Retained Earnings – P146,150.00 (April 1)
Land 50,000.00 50,000.00  Equipment – P175,000.00
nt Equipment 367,000.00 367,000.00  Purchases P143,700.00 of equipment in May
assets Total assets 727,510.00 727,510.00 and P48,300.00 in June (both purchases paid
in cash). – CASH BUDGET
IES ANDLIABILITIES
EQUITY AND EQUITY
s PayableAccounts Payable 292,000.00 292,000.00
n Stock Common Stock 200,000.00 200,000.00
EarningsRetained Earnings 235,510.00 235,510.00
liabilities and
Total
equity
liabilities and equity 727,510.00 727,510.00
 BUDGETED STATEMENT OF FINANCIAL POSITION
C. Alvarez Merchandising
Budgeted Schedule of Accounts Payable
Merchandising
C. Alvarez Merchandising For the period April 1 - June 30, 2022
BalanceBudgeted
Sheet Balance Sheet C. Alvarez Merchandising
Purchase Budget April May June Quarter 2
022 June 30, 2022
Accounts Payable,
For the period Aprilbeginning
1 - June 30, 2022 12,000.00 90,000.00 208,000.00 12,000.00
Add: Credit Purchases 180,000.00 260,000.00 170,000.00 610,000.00
Quarter 2 Quarter
Less: Payments 2made 102,000.00
April 142,000.00
May 86,000.00
June 330,000.00
Quarter 2
Accounts Payable,
Budgeted sales ending
revenue 90,000.00
200,000.00 208,000.00
500,000.00 292,000.00
300,000.00 292,000.00
1,000,000.00 250
ASSETS
Cash 142,360.00 142,360.00
Cost of Sales (60%) 120,000.00 300,000.00 180,000.00 600,000.00
Receivable
Accounts Receivable 75,000.00 75,000.00
Add: Desired ending inventory 100,000.00 60,000.00 50,000.00 50,000.00
Total inventory needed 220,000.00 360,000.00 230,000.00 650,000.00
Supplies 43,150.00 43,150.00
Less: Beginning inventory 40,000.00 100,000.00 60,000.00 40,000.00
y Inventory 50,000.00 50,000.00
Total purchases needed 180,000.00 260,000.00 170,000.00 610,000.00
Land 50,000.00 50,000.00
C. Alvarez Merchandising
nt Equipment 367,000.00 367,000.00
Schedule of Cash Disbursements on Purchases
assets Total assets 727,510.00 For 727,510.00
the period April 1 - June 30, 2022

April May June Quarter 2

IES ANDLIABILITIES
EQUITY AND EQUITY From Accounts Payable, March 31 12,000.00 12,000.00
On April material purchases:
s PayableAccounts Payable 292,000.00 292,000.00
50% x P180,000 90,000.00 90,000.00
n Stock Common Stock 200,000.00 200,000.00
50% x P180,000 90,000.00 90,000.00
On May material purchases:
EarningsRetained Earnings 235,510.00 235,510.00
50% x P260,000 52,000.00 52,000.00
liabilities and
Total
equity
liabilities and equity 727,510.00 727,510.00
50% x P260,000 52,000.00 52,000.00
On June material purchases:
50% x P170,000 34,000.00 34,000.00
Total cash disbursements for material purchases 102,000.00 142,000.00 86,000.00 330,000.00
 BUDGETED STATEMENT OF FINANCIAL POSITION

Merchandising
C. Alvarez Merchandising
BalanceBudgeted
Sheet Balance Sheet
022 June 30, 2022
C. Alvarez reported the following account
Quarter 2 Quarter 2
ASSETS
balances prior to preparing its budgeted
Cash 142,360.00 142,360.00 financial statements.
 Supplies – P43,150.00
Receivable
Accounts Receivable 75,000.00 75,000.00
Supplies 43,150.00 43,150.00  Land - P50,000.00
y Inventory 50,000.00 50,000.00  Share Capital – P200,000.00
Land 50,000.00 50,000.00  Retained Earnings – P146,150.00 (April 1)
nt Equipment 367,000.00 367,000.00  Equipment – P175,000.00
assets Total assets 727,510.00 727,510.00

IES ANDLIABILITIES
EQUITY AND EQUITY
s PayableAccounts Payable 292,000.00 292,000.00
n Stock Common Stock 200,000.00 200,000.00
EarningsRetained Earnings 235,510.00 235,510.00
liabilities and
Total
equity
liabilities and equity 727,510.00 727,510.00
 BUDGETED STATEMENT OF FINANCIAL POSITION

Merchandising
C. Alvarez Merchandising
BalanceBudgeted
Sheet Balance Sheet
022 June 30, 2022

Quarter 2 Quarter 2
ASSETS
Cash 142,360.00 142,360.00
C. Alvarez Merchandising
Receivable
Accounts Receivable 75,000.00 75,000.00
Budgeted Statement of Retained Earnings
Supplies 43,150.00 For the 43,150.00
period April 1 - June 30, 2022
y Inventory 50,000.00 50,000.00
April May June Quarter 2
Land 50,000.00 50,000.00
Retained Earnings, beginning 146,150.00 97,150.00 202,150.00 146,150.00
nt Equipment 367,000.00 367,000.00
Add: Net income - 105,000.00 33,360.00 138,360.00
assets Total assets 727,510.00 Less: 727,510.00
Dividends declared and paid 49,000.00 - - 49,000.00
Retained Earnings, ending 97,150.00 202,150.00 235,510.00 235,510.00

IES ANDLIABILITIES
EQUITY AND EQUITY
s PayableAccounts Payable 292,000.00 292,000.00
n Stock Common Stock 200,000.00 200,000.00
EarningsRetained Earnings 235,510.00 235,510.00
liabilities and
Total
equity
liabilities and equity 727,510.00 727,510.00
MANAGEMENT OF CASH, INVENTORY AND
RECEIVABLES
CASH MANAGEMENT

Involves the maintenance of

cash and marketable
securities investment level,
which will enable the
company to meet its cash
requirements and at the same
time optimize the income on
idle funds.
REASONS FOR HOLDING CASH
Precautionary Motive - Cash may held
beyond its normal operating requirement
Transaction Motive - cash needed to level in order to provide for a buffer
facilitate the normal transactions of the against contingencies such as unexpected
business, that is, to carry out its purchases slow-down in accounts receivable
and sales activities. collection, strike or increase in cash needs
beyond management’s original
projections.

Speculative Motive- cash held ready for Contractual Motive-A company may be
profit making or investment opportunities required by a bank to maintain a certain
that may come up such as a block of raw compensating balance in its demand
materials inventory offered at discounted deposit account as a condition of a loan
prices or a merger proposal. extended to it.
INVENTORY
MANAGEMENT

The objective in managing

inventory is to convert it as
quickly as possible to cash
without losing sales due to
stock outs.
KINDS OF INVENTORY
 Raw Materials – these are
purchased materials not yet put
into production.
 Work in process – these are goods
and labor put into production but
not finished.
 Finished goods – these are goods
put into production and finished.
These are ready to be sold.
ACCOUNTS RECEIVABLE
MANAGEMENT

Represents the assets of the entity that expected to be

collected and thus converted to cash. It involves
maintenance of receivables of optimal level, the
degree of credit sales to be made, and the debtor’s
collection.
“Failure is not the opposite of
success. It is part of success.”