November December January February March Actual Actual Forecast Forecast Forecast 80 000 150 000 180 000 240 000 300 000 • The cash from sales are received as follows: o 30% in the month of sale o 40% 1 month after sale o 30% 2 months after sale • Purchases are 65% of sales • Cash purchases are made in the following manner: o 20% cash in the month of purchase o 40% 1 month after purchase o 40% 2 months after purchase • Cash dividends of R15 000 was received in January • Rentals of R7 500 are due and paid at the end of each month • The company has 1 salaried employee who is paid each month • Wages incurred and paid equate to 8% of the previous months sales • The company bought a new machine in March for R250 000. Only a deposit of R130 000 was due and payable in March • A provisional tax payment of R30 000 was made at the end the February • R15 000 interest was paid against the company’s bank account in February • Dividends declared at the end of March amounted to R20 000. A 1st payment of R10 000 was made on 31st of March • A loan of R80 000 was also repaid end March • The bank cash balance at the end of December is R60 000 Required: 1.1. Prepare the cash budget for the months of January, February and March

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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November December January February March

Actual Actual Forecast Forecast Forecast

80 000 150 000 180 000 240 000 300 000

• The cash from sales are received as follows:

o 30% in the month of sale

o 40% 1 month after sale

o 30% 2 months after sale

• Purchases are 65% of sales

• Cash purchases are made in the following manner:

o 20% cash in the month of purchase

o 40% 1 month after purchase

o 40% 2 months after purchase

• Cash dividends of R15 000 was received in January

• Rentals of R7 500 are due and paid at the end of each month

• The company has 1 salaried employee who is paid each month

• Wages incurred and paid equate to 8% of the previous months sales

• The company bought a new machine in March for R250 000. Only a deposit of

R130 000 was due and payable in March

• A provisional tax payment of R30 000 was made at the end the February

• R15 000 interest was paid against the company’s bank account in February

• Dividends declared at the end of March amounted to R20 000. A 1st payment of

R10 000 was made on 31st of March

• A loan of R80 000 was also repaid end March

• The bank cash balance at the end of December is R60 000

Required:

1.1. Prepare the cash budget for the months of January, February and March

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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