ABC PLC produces and sells a branded product. The following productions and sales forecasts for the month of June, July, August and September 2020 were extracted from the records of the company: JuneJulyAugustSeptemberPurchases (in units)8,00012,00015,00013,000Sales (in units)9,00010,00014,00013,000 The following additional information is also provided:Purchase price per unit is Rs.80. All the purchases are made on credit basis and payments will be made in the following month.60% of the sales are on cash basis and balance will be collected in the following month. Selling price per unit is Rs.120.Total administration and distribution expenses for the month have been estimated to be Rs. 480,000 and it will be paid in the same month.The company intends to obtain a bank loan of Rs. 1,000,000 during the month of August 2020 to be settled in monthly installments of Rs. 60,000 each for a period of 2 years. First installment will be paid on 01st September 2020.Cash balance as at 30th June 2020 would be Rs. 125,000.Prepare the cash budget of ABC PLC for three months ending 30th September 2020 on monthly basis.

Cash budget is the quantitative summary showing estimate for receipts and payments which will be…

Answered: ABC PLC produces and sells a branded…

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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ABC PLC produces and sells a branded product. The following productions and sales forecasts for the month of June, July, August and September 2020 were extracted from the records of the company:

	June	July	August	September
Purchases (in units)	8,000	12,000	15,000	13,000
Sales (in units)	9,000	10,000	14,000	13,000

The following additional information is also provided:

Purchase price per unit is Rs.80. All the purchases are made on credit basis and payments will be made in the following month.
60% of the sales are on cash basis and balance will be collected in the following month. Selling price per unit is Rs.120.
Total administration and distribution expenses for the month have been estimated to be Rs. 480,000 and it will be paid in the same month.
The company intends to obtain a bank loan of Rs. 1,000,000 during the month of August 2020 to be settled in monthly installments of Rs. 60,000 each for a period of 2 years. First installment will be paid on 01^st September 2020.
Cash balance as at 30^th June 2020 would be Rs. 125,000.

Prepare the cash budget of ABC PLC for three months ending 30^th September 2020 on monthly basis.

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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