company chief accountant has provided you with the following information relating to the next budget period. Expenses: (in GH¢) October November December Selling & distribution 20,000 30,000 34,000 General & administration 15,000 18,000 12,000 Bad debts 21,000 15,000 20,000 Rate 8,000 6,000 10,000 Interest charges 1,600
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.
QOPPC company chief accountant has provided you with the following information relating to the next budget period.
- Expenses: (in GH¢)
|
|
October |
November |
December |
|
Selling & distribution |
20,000 |
30,000 |
34,000 |
|
General & administration |
15,000 |
18,000 |
12,000 |
|
|
21,000 |
15,000 |
20,000 |
|
Rate |
8,000 |
6,000 |
10,000 |
|
Interest charges |
1,600 |
2,000 |
2,400 |
|
|
30,000 |
10,000 |
10,000 |
Expenses are payable in the month of incurrence.
2. A
3. Estimated cash balance at the end of September will be GH¢5000. Cash balances should not be less than GH¢10,000. Cash can be borrowed in multiples of GH¢10,000 to finance any deficit at an interest rate of 15% per annum.
4. The sales manager's salary, which is GH¢ 7000 per month is expected to increase by GH¢1,000 every month after June
5. Motor vehicle will be purchased in November at GH¢240,000. Depreciation for motor van should be calculated at 10% in December.
6. Credit purchases have been made as follows:
|
September |
GH¢200,000 |
|
October |
GH¢240,000 |
|
November |
GH¢200,000 |
|
December |
GH¢300,000 |
75% of purchases are paid for in the month of purchase and the remainder in the month after purchase.
7. Details of expected sales (in units) are given below:
|
August |
20,000 |
|
September |
18,000 |
|
October |
21,000 |
|
November |
15,000 |
|
December |
20,000 |
Sales are likely to be made at a unit price of GH¢ 30.
8. Cash sales is expected to be made as follows:
|
August |
GH¢140, 000 |
|
September |
GH¢100,000 |
|
October |
GH¢200,000 |
|
November |
GH¢120,000 |
|
December |
GH¢140,000 |
The pattern for the collection of debts from customers is expected to be as follows:
i. 60% in the month of sales (3% cash discount allowed).
ii. 20% in the first month after the month of sale.
iii. 15% in the second month after the month of sale.
iv. 5% is usually regarded as bad debt
9. Excess funds are invested (in multiples of GH¢10,000) in short term securities, at an interest rate of 20% per annum.
10. Borrowing must be paid together with any accrued interest whenever funds are available.
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