Janus Inc. needs to prepare a cash budget.
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.
Janus Inc. needs to prepare a
|
Actual |
Forecast |
||||
|
November |
December |
January |
February |
March |
April |
|
$200,000 |
$220,000 |
$280,000 |
$320,000 |
$340,000 |
$330,000 |
Thirty percent of each month's sales are in cash, 50% are paid the month after sale and 20% are paid two months after sale. Materials cost 30% of sales and are purchased one month prior to sale and paid for 30 days later. Labor expense is 40% of sales, selling and administrative expenses are 5% of sales and both are paid in the month of sale.
Plan or estimation of cash receipts & cash payments for the period is called as Cash Budget.
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