a) Underline the main components which are considered while preparing a budget in a Company. What...
a) Underline the main components which are considered while
preparing a budget in a Company. What are the major considerations
business owners should make as they budget and forecast?
b) Prepare a Cash budget for the Quarter April To June based on the
following data and additional information.
Month Sales($) Purchase($) Wages($)
Overheads($)
Jan 60,000 36,000 9,000 10,000
Feb 62,000 38,000 8,000 9,500
Mar 64,000 33,000 10,000 11,500
Apr 58,000 35,000 8,500 9,000
May 56,000 39,000 9,000 9,500
Jun 60,000 34,000 8,000 9,000
Additional Information: 1. Cash balance at 1st April is $800,000
2. Sales is 40% cash sales and 60% is collected in the following month.
3. All purchases of a month are paid after 2 months.
4. Land was purchased in April for $85,000
5. Wages of a month are paid the following month. All overheads are paid the same month.
6. Loan repaid in May $16,000
7. Dividend of $75,000 is expected to be received in May.
Homework Answers
| Sales Budget | |||||||
| Particulars | January | February | March | April | May | June | |
| Sales | $ 60,000.00 | $ 62,000.00 | $ 64,000.00 | $ 58,000.00 | $ 56,000.00 | $ 60,000.00 | |
| Cash Sales | $ 24,000.00 | $ 24,800.00 | $ 25,600.00 | $ 23,200.00 | $ 22,400.00 | $ 24,000.00 | |
| Credit Sales | $ 36,000.00 | $ 37,200.00 | $ 38,400.00 | $ 34,800.00 | $ 33,600.00 | $ 36,000.00 | |
| Collection Budget | |||||
| Particulars | April | May | June | ||
| For the month of: | |||||
| March | $ 38,400.00 | ||||
| April | $ 34,800.00 | ||||
| May | $ 33,600.00 | ||||
| Cash sales | $ 23,200.00 | $ 22,400.00 | $ 24,000.00 | ||
| Total collection | $ 61,600.00 | $ 57,200.00 | $ 57,600.00 | ||
| Cash Disbursement Budget - Purchases | |||||
| Particulars | April | May | June | ||
| For the month of: | |||||
| February | $ 38,000.00 | ||||
| March | $ 33,000.00 | ||||
| April | $ - | $ - | $ 35,000.00 | ||
| Total payments | $ 38,000.00 | $ 33,000.00 | $ 35,000.00 | ||
| Cash Budget | ||||||
| Particulars | April | May | June | |||
| Beginning Cash Balance | $ 800,000.00 | $ 718,100.00 | $ 782,800.00 | |||
| Add: | Cash collection | $ 61,600.00 | $ 57,200.00 | $ 57,600.00 | ||
| Add: | Dividend | $ - | $ 75,000.00 | $ - | ||
| Total cash available | $ 861,600.00 | $ 850,300.00 | $ 840,400.00 | |||
| Less: | Cash disbursements | |||||
| Purchases | $ 38,000.00 | $ 33,000.00 | $ 35,000.00 | |||
| Wages | $ 11,500.00 | $ 9,000.00 | $ 9,500.00 | |||
| OH | $ 9,000.00 | $ 9,500.00 | $ 9,000.00 | |||
| Land purchase | $ 85,000.00 | $ - | $ - | |||
| Loan repaid | $ - | $ 16,000.00 | $ - | |||
| Total disbursements | $ 143,500.00 | $ 67,500.00 | $ 53,500.00 | |||
| Ending cash balance | $ 718,100.00 | $ 782,800.00 | $ 786,900.00 | |||
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