Cost & Management Accounting Lecture-38

Cash Budget

XYZ Ltd Cash Budget For the month of Jan-March Jan Feb March Opening balance Add Receipts (Anticipated cash receipt from all sources) Less Payments (Anticipated utilization of cash) Excess / Deficit Bank barrowing / Overdraft Closing balance

Simple Cash Budget – Question D.A corporation has a following information relating to the month of January: Opening cash balance Rs. 20,000. Cash receipts are: Credit sales Rs. 1,40,000, Cash sales Rs. 80,000, Loan Rs. 2,00,000, Disposal of machine Rs. 60,000, Further capital Rs. 1,20,000. Cash payments are: Payment to creditor Rs. 60,000, Cash purchase Rs. 60,000, machine purchase Rs. 3,50,000, Administrative expenses Rs. 40,000, Selling expenses Rs. 75,000 and Interest on loan Rs. 5,000

XYZ Ltd Cash Budget For the month of Jan Opening balance 20,000 Add Receipts Receipt from sales: Credit sales 1,40,000 Cash sales 80,000 Loan 2,00,000 Further capital 1,20,000 Disposal of machine 60,000 6,00,000 6,20,000 Less Payments Purchases: Payment to creditor 60,000 Cash purchase 60,000

Administrative expenses 40,000 Selling expenses 75,000 Machine purchase 3,50,000 Administrative expenses 40,000 Selling expenses 75,000 Interest on loan 5,000 5,90,000 Closing balance 30,000 Carry on from previous slide

Complex Cash Budget-Problem Month Sales Jan 2,00,000 Feb 2,20,000 Mar 3,00,000 Apr 2,50,000 May 2,80,000 June First all months will appear. Second value of sales will appear one by one 20 % of the goods will be sold on cash. 40% of the rest of the sales will be recovered in the month of sales. 30% will be recovered in the second month and balance will recovered in third month. Calculate cash received from sale during 2nd quarter

March Cash sales = 3,00,000 x 20% = 60,000 Credit sales = 3,00,000 x 80% = 2,40,000 Recovered in March = 2,40,000 x 40% = 96,000 Recovered in April = 2,40,000 x 30% = 72,000 Recovered in May = 2,40,000 x 30% = 72,000

February Cash sales = 2,20,000 x 20% = 44,000 Credit sales = 2,20,000 x 80% = 1,76,000 Recovered in Feb = 1,76,000 x 40% = 70,400 Recovered in Mar = 1,76,000 x 30% = 52,800 Recovered in Apr = 1,76,000 x 30% = 52,800

April Cash sales = 2,50,000 x 20% = 50,000 Credit sales = 2,50,000 x 80% = 2,00,000 Recovered in April = 2,00,000 x 40% = 80,000 Recovered in May = 2,00,000 x 30% = 60,000 Recovered in June = 2,00,000 x 30% = 60,000

May Cash sales = 2,80,000 x 20% = 56,000 Credit sales = 2,80,000 x 80% = 2,24,000 Recovered in May = 2,24,000 x 40% = 89,600 Recovered in June = 2,24,000 x 30% = 67,200

June Cash sales = 3,00,000 x 20% = 60,000 Credit sales = 3,00,000 x 80% = 2,40,000 Recovered in June = 2,40,000 x 40% = 96,000

Solution Months Sales April May June Jan 2,00,000 ---- Feb 2,20,000 52,800 Mar 3,00,000 72,000 Apr 2,50,000 50,000 80,000 60,000 2,80,000 56,000 89,600 67,200 96,000 Total 2,54,800 2,77,600 2,83,200 First individual month with sales value will appear Secondly April will come one by one as a row vise Than march as a row wise and so on