cash budgeting examples

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Cash Budget Quarters Particulars 1 2 3 CASH INFLOWS: Collection from debtors From Current sales (2/3 of quart 5,000 7,000 12,000 From Prior sales (1/3 of the las 3,000 2,500 3,500 Total Cash Inflows during the year 8,000 9,500 15,500 CASH OUTFLOWS: Production cost 7,000 10,000 8,000 Selling and Administrative cost 1,000 2,000 2,900 Purchases of plant and other fix 100 1,100 2,100 Total Cash Outflow during the year 8,100 13,100 13,000 Surplus / (Difficiency) (100) (3,600) 2,500 Add: Cash (at start) 650 550 500 Balance 550 (3,050) 3,000 Borrowing made during the year - 3,550 - Payment of Loan - - (2,500) Ending Cash in hand 550 500 500 Borrowing = Negative balance + Desired ending cash balance. Payment of loan = Surplus cash - Desired ending cash balance. 1 Minimum required cash balance 500 2 Cash at start of the year 650 Q1 Q2 Q3 a Cash inflow during the year 8,000 9,500 15,500 b Cash outflow during the year 8,100 13,100 13,000 Surplus / (Deficiency) (100) (3,600) 2,500 c add: Cash (at start) 650 550 500 Balance of cash 550 (3,050) 3,000 d add: Borrowing during the period - 3,550 e less: Repayment of loan - - 2,500 Balance / Required cash (at end) 550 500 500

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Cash Budget Quarters

Particulars 1 2 3 4 CASH INFLOWS: Collection from debtors From Current sales (2/3 of quarter's 5,000 7,000 12,000 7,000 From Prior sales (1/3 of the last quar 3,000 2,500 3,500 6,000 Total Cash Inflows during the ye 8,000 9,500 15,500 13,000

CASH OUTFLOWS: Production cost 7,000 10,000 8,000 8,500 Selling and Administrative cost 1,000 2,000 2,900 1,600 Purchases of plant and other fixed a 100 1,100 2,100 2,100 Total Cash Outflow during the y 8,100 13,100 13,000 12,200 Surplus / (Difficiency) (100) (3,600) 2,500 800 Add: Cash (at start) 650 550 500 500

Balance 550 (3,050) 3,000 1,300 Borrowing made during the year - 3,550 -

Payment of Loan - - (2,500) (800) Ending Cash in hand 550 500 500 500

Borrowing = Negative balance + Desired ending cash balance.

Payment of loan = Surplus cash - Desired ending cash balance.

1 Minimum required cash balance 500 2 Cash at start of the year 650

Q1 Q2 Q3 Q4 a Cash inflow during the year 8,000 9,500 15,500 13,000 b Cash outflow during the year 8,100 13,100 13,000 12,200

Surplus / (Deficiency) (100) (3,600) 2,500 800 c add: Cash (at start) 650 550 500 500

Balance of cash 550 (3,050) 3,000 1,300 d add: Borrowing during the period - 3,550 e less: Repayment of loan - - 2,500 800

Balance / Required cash (at end) 550 500 500 500

Borrowing = Negative balance + Required cash

Total 46,000 46,400 (400) 650 250 3,550 3,300 500

Particulars Month January February March

CASH INFLOWS: Cash Sales (40% of total sales) 16,000 18,000 22,000 Collection from debtors (One month after sales) 30,000 24,000 27,000

Total Cash Inflows 46,000 42,000 49,000

CASH OUTFLOWS: Payment for the purchase of merchandise 14,000 33,000 36,000 Sales Commission (5% of sales) 3,500 2,000 2,250 Fixed cost (excluding depreciation) 3,000 3,000 3,000

TOTAL CASH OUTFLOW 20,500 38,000 41,250

Surplus / (Difficiency) 25,500 4,000 7,750

Cash (at start) 7,500 33,000 37,000 Cash (at end) 33,000 37,000 44,750

Working of Purchases:

January February March Cost of goods sold (60% of current sales) 24,000 27,000 33,000 Add: Desired ending inventory (60% of sales) 60,000 69,000 66,000 Total 84,000 96,000 99,000 Less: Opening inventory (51,000) (60,000) (69,000) Purchases 33,000 36,000 30,000

CASH INFLOWS Collection from Sales

a) Cash Sales for April

b) Collection from debtors (Credit Sales) From Feburary Sales From March Sales From April Sales

Total Cash Inflow during the year

CASH OUTFLOW Payment for purchases

March purchases April purchases

Payment of selling and admin exp.

Total Cash Outflow during the year

SURPLUS / (DIFFICIENCY)

Add: Cash balance (at start)

Purchase Budget: Cost of Sales - April

Add: Desired ending inventory

Less: Expected opening inventory

(Rs. 170,000 x 20%) 34,000

Collection from debtors (Credit Sales) (Rs. 120,000 x 80% = Rs. 96,000 x 25%) 24,000 (Rs. 150,000 x 80% = Rs. 120,000 x 30%) 36,000 (Rs. 170,000 x 80% = Rs. 136,000 x 40%) 54,400

Total Cash Inflow during the year 148,400

(Rs.100,000 x 98% = 98,000 x 1/2) 49,000 (Rs. 30,408 x 98% = 29,800 x 1/2) 14,700

(Rs. 45,000 - Rs. 10,000) 35,000

Total Cash Outflow during the year 98,700

49,700

30,000

Budget Cash (at end) 79,700

Gross Net (Rs. 170,000 x 50%) 85,000 83,300 (Rs. 140,000 x 50% = 70,000 x 2.5 times) 175,000 171,500 (Rs. 175,000 x 98%) Total 260,000 254,800 (Rs. 225,000 / 98%) (229,592) (225,000) Purchase budget 30,408 29,800

(Rs. 85,000 x 98%)

(Rs. 175,000 x 98%)

Required 1 Cash collection in Feburary Collection from Feb Sales (Rs. 54,000 x 55%) Collection from Jan Sales (Rs. 65,000 x 30%) Collection from Dec Sales (Rs. 87,000 x 13%)

Cash collection in Feburary

Working Calculation of Dec Sales: The amount of Dec sales was collected in the month Dec is 55%. Therefore the remaining % of Dec Sales at Dec 31 or Jan 1 is 45%

Balance of A/Rec (Dec) is Rs. 39,150 at Jan 01 which is 45% of sales

Sales of December was Rs. 39,150 / 45% 87,000

Required no. 2: Cash Budget - January

CASH INFLOW: Collection from Jan Sales (Rs. 65,000 x 55%) 35,750 Collection from Dec Sales (Rs. 87,000 x 30%) 26,100 Collection from Nov Sales (Rs. 90,000 x 13%) 11,700

CASH INFLOW (Jan) 73,550

CASH OUTFLOW: Cash payment for the purchases of merchandise 10,000 Cash payment for the expenses of Jan 41,000

CASH OUTFLOW (Jan) 51,000

Surplus 22,550 Add: Cash (at start) 5,000

CASH (at End) - Jan 31 / Feb 01 27,550

Working: Calculation of Nov. Sales:

The amount of Nov sales was collected in the month Nov is 55% and in Dec 30% Therefore the remaining % of Nov. Sales at Dec 31 or Jan 1 is 15%

Balance of A/Rec (Nov.) is Rs. 13,500 at Jan 01 which is 15% of sales

Sales of November was Rs. 13,500 / 15% 90,000

Required no. 3: Cash Budget - Feb

CASH INFLOW: CASH INFLOW (Feb.) 60,510

CASH OUTFLOW: Cash payment for the purchases of merchandise 12,500 Cash payment for the expenses of Jan 41,000

CASH OUTFLOW (Feb) 53,500

Surplus 7,010 Add: Cash (at start) 27,550

CASH (at End) - Feb 28 34,560

29,700 19,500 11,310 60,510

The amount of Dec sales was collected in the month Dec is 55%. Therefore the remaining % of Dec Sales at Dec 31 or Jan 1 is 45%

Balance of A/Rec (Dec) is Rs. 39,150 at Jan 01 which is 45% of sales

The amount of Nov sales was collected in the month Nov is 55% and in Dec 30%

Required no:1 Cash Collected in 19 B, resulting from sales of 19 A and 19 B

a) Cash collected from 19 A Sales:

Balance of account receivable (at start)

b) Cash collected from 19 B sales:

i) Cash Sales (1,200,000 x 20%) 240,000 ii) Credit Sales (1,200,000 x 80%) 960,000 Less: Bad debts (5,000) Less: Account receivable (at end) (78,000) 877,000

Cash collected from 19 B sales

Total Cash collected in 19 B

Required no.2: Cash disbrusment on 19 B for purchases of merchandise: a) Calculate the amount of purchases in 19 B

Cost of goods sold 840,000 Add: Inventory (at end) 140,000

Total inventory available for sales 980,000 Less: Inventory (at start) (150,000)

Purchase in 19 B 830,000

b) Calculate the amount of payment: Account payable (at start) 95,000 Add: Purchase during the year 830,000

Total account payable 925,000 Less: Account payable (at end) (98,000) Payment to account payable for purchase of merchandise 19 B 827,000

Required no.3: Cash disbrusement in 19 B for variable and fixed expenses:

1) Payment of Variable Expenses in 19 B: For 19 A Variable Expenses (110,000 x 50%) 55,000 For 19 B Variable Expenses (120,000 x 50%) 60,000

Payment of Variable Expenses in 19B: 115,000

Working: % of Variable expenses to Sales = Variable Expenses / Sales For 19 B = 120,000 / 1,200,000 x 100 Variable Expenses = 10% of sales

Sales of 19 A is Rs. 1,100,000. Therefore Variable expenses for 19 A was: Variable Expenses = 1,100,000 x 10%

Variable Expenses = 110,000 of 19 A

2) Payment of Fixed Expenses in 19 B:

For 19 A Fixed Expenses (60,000 x 20%) 12,000

For 19 B Fixed Expenses (60,000 x 80%) 48,000

Payment of Fixed Expenses in 19 B 60,000

Working: Fixed Expenses (Cash payment only)

Total amount of fixed expenses 100,000 Less: Non- Cash Expenses: a) Depreciation 35,000 b) Bad Debt 5,000 (40,000)

Cash Fixed Expenses 60,000

Total Cash Disbursed during 19 B

Variable Expenses 115,000 Fixed Expenses 60,000

175,000

84,000

1,117,000

1,201,000

Sales of 19 A is Rs. 1,100,000. Therefore Variable expenses for 19 A was:

Required no.1: Cash Disbursed during the month of June:

1 Payment for purchase of merchandise:

For May (11,250 units x Rs. 20 = Rs. 225,000 x 46%) 103,500 For June (12,180 units x Rs. 20 = Rs. 243,600 x 54%) 131,544

2 Payment of Marketing, General and Admin Expenses:

For May (51,550 x 46%) 23,713 For June (49,300 x 54%) 26,622

3 Payment of Wages and Salaries:

TOTAL CASH DISBURSED IN JUNE

WORKING:

1) Calculation of purchases for the month of May: (in units)

Material needed in production in May 11,900 add: Desired ending R/M (130%) 14,820 (11,400 x 130%)

26,720 less: Expected opening R/M (15,470) (Rs. 309,400 / Rs. 20)

Purchases (in May) 11,250

2) Calculation of purchases for the month of June:

(in units) Material needed in production in June 11,400 add: Desired ending R/M (130%) 15,600 (12,000 x 130%)

27,000 less: Expected opening R/M (14,820)

Purchases (in June) 12,180

3) Calculation of Expenses for May and June:

Operating Expenses are 15% of current month sales

Sales in May 357,000 Sales in June

Operating Expenses = 357,000 x 15% Operating Expenses = 342,000 x 15% Operating Expenses 53,550 Operating Expenses Less: Non-cash item Less: Non-cash item Depreciation (2,000) Depreciation

Operating Expenses 51,550 Operating Expenses (Cash Basis) (Cash Basis)

4) Calculation of payment of wages and salaries:

Total payroll in June 38,000

add: Accured payrol (at start) 3,300 Total Payable 41,300

less: Accured payrol (at end) (3,400)

Payment of Wages paid in June 37,900

Required no. 2: Cash collection in the month of May:

Cash collected from sales in the month of March (354,000 x 9%)

Cash collected from sales in the month of April: a) Within discount period (363,000 x 60% = 217,800 x 97%) b) At the end of month (363,000 x 25% x 100%)

CASH COLLECTED IN MAY

235,044

50,335

37,900

323,279

342,000

Operating Expenses = 342,000 x 15% 51,300

(2,000)

49,300

31,860

211,266 90,750

333,876