Part #5: E Company has budgeted sales revenues of $174,000 for May, $210,000 for June, $238,000 for July, and $166,000 for August. To prepare a cash budget, the company must determine the budgeted cash collections from sales. Generally the trend has been 55 percent collected in the month of sale, 25 percent collected in the month following sale, 18 percent collected in the second month following sale, and 2 percent uncollectible. Also, E Company grants a 2 percent cash discount to customers who pay in the month of sale (so they only collect 98 percent of the total amount for those sales instead of the usual 100 percent). Prepare a schedule of cash collections for the month of July only.
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.
Part #5: E Company has budgeted sales revenues of $174,000 for May, $210,000 for June, $238,000 for July, and $166,000 for August. To prepare a
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