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1. Explain Cash Budget 2. Prepare Cash budget for Company 3. Interpret the Results.

1. Explain Cash Budget 2. Prepare Cash budget for Company 3. Interpret the Results.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Saudi Agricultural Company, engaged in manufacturing bricks and other relevant items and most of the transaction accomplished in 'Cash' only. The company is giving following transactions for the year 2020, you are required to prepare 'CASH BUDGET' for three months from February to April. Following are company policies for paying and receiving Cash: 1. 20% Sales is for cash and the remaining amount is realized in the month following that of sales. Suppliers Supply raw materials at one month's credi 3. Wage-bill is paid in first week of next month. 4. Overheads are paid in cash in the same month. 5. Monthly rent payment is ` 1,000. 6. Advance Income Tax of ` 15,000 is payable in April. 7. Bonus of ` 10,000 is payable to workers in February. 8. Plant Costing 80,000 is due to be installed in February. The part of the bill will be paid in March amounting to ` 18,500. 9. Half year interest on 12% ` 50,000 Debentures is to be received in February and August every year. 10. Cash at Bank on 1st February estimated at `5,000.
Transcribed Image Text:Saudi Agricultural Company, engaged in manufacturing bricks and other relevant items and most of the transaction accomplished in 'Cash' only. The company is giving following transactions for the year 2020, you are required to prepare 'CASH BUDGET' for three months from February to April. Following are company policies for paying and receiving Cash: 1. 20% Sales is for cash and the remaining amount is realized in the month following that of sales. Suppliers Supply raw materials at one month's credi 3. Wage-bill is paid in first week of next month. 4. Overheads are paid in cash in the same month. 5. Monthly rent payment is ` 1,000. 6. Advance Income Tax of ` 15,000 is payable in April. 7. Bonus of ` 10,000 is payable to workers in February. 8. Plant Costing 80,000 is due to be installed in February. The part of the bill will be paid in March amounting to ` 18,500. 9. Half year interest on 12% ` 50,000 Debentures is to be received in February and August every year. 10. Cash at Bank on 1st February estimated at `5,000.
Company is proving details of month's expenses as follows: 2020 Sales Purchases Wages Overheads Months January 85,000 48,000 10,000 12,500 February 90,000 52,000 11,000 13,500 March 1,20,000 60,000 14,000 15,000 Аpnil 1,30,000 62,000 14,000 16,000 You are required to: 1. Explain Cash Budget 2. Prepare Cash budget for Company 3. Interpret the Results. 4. Give your recommendation for Credit Policy of Company. 5. What do you think about company's Cash or Liquid Position? 6. How company can increase its liquidity?
Transcribed Image Text:Company is proving details of month's expenses as follows: 2020 Sales Purchases Wages Overheads Months January 85,000 48,000 10,000 12,500 February 90,000 52,000 11,000 13,500 March 1,20,000 60,000 14,000 15,000 Аpnil 1,30,000 62,000 14,000 16,000 You are required to: 1. Explain Cash Budget 2. Prepare Cash budget for Company 3. Interpret the Results. 4. Give your recommendation for Credit Policy of Company. 5. What do you think about company's Cash or Liquid Position? 6. How company can increase its liquidity?
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