1. Slides prepared by Peter Miller ©National Core Accounting Publications 1 Cash Budgets Accrual GST Chapter 6 Manage Budgets & Forecasts

2. Slides prepared by Peter Miller ©National Core Accounting Publications 2 Cash Budgets Forecast the business’s ability to pay its debts as and when they fall due. Enable predicted borrowing to be arranged ahead of time. Allows planning for investment of surplus funds.

3. Slides prepared by Peter Miller ©National Core Accounting Publications 3 Budgets required Accounts Receivable ( Debtors ) Collections Budget. Cash Receipts Budget. Cash Payments Budget. The following sub budgets may need to be prepared first in order to complete the Cash Budget

4. Slides prepared by Peter Miller ©National Core Accounting Publications 4 GST and Cash Budgets Cash Basis GST liability arises when the payment is received or made. The 10% GST is calculated on the final amount of cash after any discounts. Under the cash basis of accounting for the GST there are no adjustments made for discounts or bad debts. GST must be incorporated into our budgets using either a cash or accruals basis.

5. Slides prepared by Peter Miller ©National Core Accounting Publications 5 GST and Cash Budgets Accruals Basis GST liability arises in the first tax period that an invoice is issued or a payment is received. Input tax credits may be claimed in the earlier part of the tax period when the invoice is issued or when the payment for the taxable supply which has occurred before an invoice is issued. In this text adjustments are recognised when the BAS is lodged.

6. Slides prepared by Peter Miller ©National Core Accounting Publications 6 Accounting for GST GST received is posted to a GST collected account. GST paid ( Input Tax Credits ) are posted to a GST paid account. The difference is remitted to or received from the tax office in the next available BAS period. In this chapter we will assume that the BAS is lodged with the ATO quarterly.

7. Slides prepared by Peter Miller ©National Core Accounting Publications 7 Items not Subject to GST Wages & Salaries Taxation Financial Services These include:

8. Slides prepared by Peter Miller ©National Core Accounting Publications 8 Non – Cash Items Depreciation Discount Allowed Discount Received Bad Debts Goodwill written off These items are not cash expenses so are not included in Cash Budgets

9. Slides prepared by Peter Miller ©National Core Accounting Publications 9 Accounts Receivable Collections Budget A schedule of estimated receipts from debtors for a period. Example

10. Slides prepared by Peter Miller ©National Core Accounting Publications 10 Accounts Receivable Collections Budget A schedule of estimated receipts from debtors for a period. Solution

11. Slides prepared by Peter Miller ©National Core Accounting Publications 11 Accounts Receivable Collections Budget A schedule of estimated receipts from debtors for a period. Example: With Discount

12. Slides prepared by Peter Miller ©National Core Accounting Publications 12 Accounts Receivable Collections Budget Solution

13. Slides prepared by Peter Miller ©National Core Accounting Publications 13 Cash receipts budget A cash receipts budget is a forecast of all expected receipts of a business for a period Example

14. Slides prepared by Peter Miller ©National Core Accounting Publications 14 Cash receipts budget Solution

15. Slides prepared by Peter Miller ©National Core Accounting Publications 15 Cash receipts budget Solution

16. Slides prepared by Peter Miller ©National Core Accounting Publications 16 Cash Payments budget A cash payments budget is a forecast of all expected payments of a business for a period. Example

17. Slides prepared by Peter Miller ©National Core Accounting Publications 17 Cash Payments budget A cash payments budget is a forecast of all expected payments of a business for a period. Example

18. Slides prepared by Peter Miller ©National Core Accounting Publications 18 Cash Payments budget A cash payments budget is a forecast of all expected payments of a business for a period. Solution

19. Slides prepared by Peter Miller ©National Core Accounting Publications 19 Cash Payments budget A cash payments budget is a forecast of all expected payments of a business for a period. Solution

20. Slides prepared by Peter Miller ©National Core Accounting Publications 20 Cash Budget Format

21. Slides prepared by Peter Miller ©National Core Accounting Publications 21 Cash Budget Summary of expected receipts and payments Example 1– GST collected on a cash basis Simon’s expects cash receipts and payments for the next three months are: Month 1 Month 2 Month 3 Receipts $15,280 $14,700 $14,300 Payments $ 8,650 $10,500 $14,800 Opening balance of cash is $7,500. All receipts and payments are subject to the GST ( cash basis ). Required: Prepare a Cash Budget for the next three months.

22. Slides prepared by Peter Miller ©National Core Accounting Publications 22 Solution

23. Slides prepared by Peter Miller ©National Core Accounting Publications 23 Cash Budget Collecting GST on an accruals basis Example

24. Slides prepared by Peter Miller ©National Core Accounting Publications 24 Solution – Accounts receivable schedule October Accounts Receivable Balance

25. Slides prepared by Peter Miller ©National Core Accounting Publications 25 Solution – GST liability - Cash & Credit Sales

26. Slides prepared by Peter Miller ©National Core Accounting Publications 26 Solution – GST owing to the ATO

27. Slides prepared by Peter Miller ©National Core Accounting Publications 27 Solution – Cash Budget ( extract ) Note: The only difference between recognising GST under a cash and accrual basis is in the ATO amount payable/received.

28. Slides prepared by Peter Miller ©National Core Accounting Publications 28 Financial Budgets Next Chapter 7