Ming Chung Limited is applying for additional bank overdraft finance to enable the company to make the plant and machinery purchase described below. The directors have has asked you to draw up a cash budget for the 6 months to 30 June 2020 to prove to the bank that that overdraft finance will be repaid by 30 June 2020. The company provides you with the following financial information: Month Sales Purchases Wages Overheads £ £ £ £ November 2019 (actual) 45,800 18,400 9,600 6,000 December 2019 (actual) 34,600 13,900 9,800 14,000 January 2020 (budgeted) 42,200 16,800 10,500 7,000 February 2020 (budgeted) 44,000 17,600 11,200 7,500 March 2020 (budgeted) 54,000 21,600 13,500 18,800 April 2020 (budgeted) 57,600 23,000 14,400 8,000 May 2020 (budgeted) 61,800 24,700 15,300 9,200 June 2020 (budgeted) 63,700 25,500 15,900 9,800 Notes ♦ The bank balance at 1 January 2020 is expected to be £25,000. ♦ 60% of sales are for cash with the other 40% being on credit. 70% of credit sales pay in the month following the month of sale with the other 30% paying 2 months after the month of sale. ♦ 50% of purchases are paid for in the month after the month in which they are made with the remainder being paid 2 months after the month in which the purchases were made. ♦ 70% of wages are paid in the current month with the other 30% (representing tax and national insurance deductions) being paid over to the taxation authorities in the following month. ♦ Overheads are paid in the month in which they are incurred. Overheads include £4,000 of plant and machinery depreciation each month. ♦ The directors of Ming Chung Limited expect to make a payment of £100,000 in January 2020 to acquire new plant and machinery. Required Prepare the cash budget for Ming Chung Limited for the 6 months ended 30 June 2020.?
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.
Question 1
Ming Chung Limited is applying for additional bank overdraft finance to enable the
company to make the plant and machinery purchase described below. The directors
have has asked you to draw up a
prove to the bank that that overdraft finance will be repaid by 30 June 2020. The
company provides you with the following financial information:
Month Sales Purchases Wages
£ £ £ £
November 2019 (actual) 45,800 18,400 9,600 6,000
December 2019 (actual) 34,600 13,900 9,800 14,000
January 2020 (budgeted) 42,200 16,800 10,500 7,000
February 2020 (budgeted) 44,000 17,600 11,200 7,500
March 2020 (budgeted) 54,000 21,600 13,500 18,800
April 2020 (budgeted) 57,600 23,000 14,400 8,000
May 2020 (budgeted) 61,800 24,700 15,300 9,200
June 2020 (budgeted) 63,700 25,500 15,900 9,800
Notes
♦ The bank balance at 1 January 2020 is expected to be £25,000.
♦ 60% of sales are for cash with the other 40% being on credit. 70% of credit
sales pay in the month following the month of sale with the other 30% paying 2
months after the month of sale.
♦ 50% of purchases are paid for in the month after the month in which they are
made with the remainder being paid 2 months after the month in which the
purchases were made.
♦ 70% of wages are paid in the current month with the other 30% (representing
tax and national insurance deductions) being paid over to the taxation
authorities in the following month.
♦ Overheads are paid in the month in which they are incurred. Overheads include
£4,000 of plant and machinery
♦ The directors of Ming Chung Limited expect to make a payment of £100,000 in
January 2020 to acquire new plant and machinery.
Required
Prepare the cash budget for Ming Chung Limited for the 6 months ended 30 June
2020.?
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