Cash budget-Basic Grenoble Enterprises had sales of $49,600 in March and $60,300 in April. Forecast sales for May, June, and July are $69,900, $79,600, and $99,500, respectively. The firm has a cash balance of $5,500 on May 1 and wishes to maintain a minimum cash balance of $5,500. Given the following data, prepare and interpret a cash budget for the months of May, June, and July. (1) The firm makes 18% of sales for cash, 60% are collected in the next month, and the remaining 22% are collected in the second month following sale. (2) The firm receives other income of $1,700 per month. (3) The firm's actual or expected purchases, all made for cash, are $49,700, $70,200, and $80,400 for the months of May through July, respectively. (4) Rent is $2,500 per month. (5) Wages and salaries are 8% of the previous month's sales. (6) Cash dividends of $2,800 will be paid in June. (7) Payment of principal and interest of $4,300 is due in June. (8) A cash purchase of equipment costing $6,000 is scheduled in July. (9) Taxes of $5,600 are due in June.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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