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Required: i) Prepare the Cash Budget by month for the first quarter of 2016. Identify and comment on those areas of the cash budget that you wish to draw to the attention of management and recommend action to be taken.

Required: i) Prepare the Cash Budget by month for the first quarter of 2016. Identify and comment on those areas of the cash budget that you wish to draw to the attention of management and recommend action to be taken.

FINANCIAL ACCOUNTING
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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7. The company plans to spend ZMW 10,000 on marketing and advertising in January 2023 and a further ZMW5, 000 in the same area in March 2023. 8. Administration overheads are budgeted at ZMW500 per month: 60% is paid in the month of usage and the balance one month later. 9. Fixed assets will be depreciated at 25% per annum of the initial investment capital. Required: i) Prepare the Cash Budget by month for the first quarter of 2016. Identify and comment on those areas of the cash budget that you wish to draw to the attention of management and recommend action to be taken.
Transcribed Image Text:7. The company plans to spend ZMW 10,000 on marketing and advertising in January 2023 and a further ZMW5, 000 in the same area in March 2023. 8. Administration overheads are budgeted at ZMW500 per month: 60% is paid in the month of usage and the balance one month later. 9. Fixed assets will be depreciated at 25% per annum of the initial investment capital. Required: i) Prepare the Cash Budget by month for the first quarter of 2016. Identify and comment on those areas of the cash budget that you wish to draw to the attention of management and recommend action to be taken.
QUESTION ONE Zambeka limited is a modern company that offers customised products to its clients. The company has received some seed fund (cash) that will be used as equity capital amounting to ZMW150, 000 on January 1 2023. You have just been engaged by the company to prepare a cash budget for the first three months of the 2023 using the information given below: 1. The Budgeted sales for the first quarter of 2023 are expected to be ZMW240,000. Since the company will be launching the same year, sales are expected to gradually pick as product awareness increases. It is assumed that 15% of the first quarter sales will be in January, 30% in February and the remainder in March. If these projections hold it is anticipated that annual sales in 2023 will be ZMW1, 000,000. 2. Clients must pay a deposit of 5% of the price when the order is made. Payments of 45% and 50% of the der price month one an month two be paid following the month of sale. The company does not plan for any defaulting customers (Bad Debts). 3. The company will employ six staff and each will be paid ZMW4,500 at the end of each month. 4. The company plans to procure materials for the jobs for a value of ZMW 100,000 in January. A deposit of 25% is payable on collections and the balance is paid in equal instalments in February and March. 5. The company will rent offices at a cost of ZMW6, 500 per month paid three months in advance at the start of the lease contract. The landlord charges a security deposit of 10% for each of three month's rent. 6. The production costs are paid in the month they are incurred and have been budget as follows: January February March ZMW 1,300 ZMW 4,200 ZMW 8,000
Transcribed Image Text:QUESTION ONE Zambeka limited is a modern company that offers customised products to its clients. The company has received some seed fund (cash) that will be used as equity capital amounting to ZMW150, 000 on January 1 2023. You have just been engaged by the company to prepare a cash budget for the first three months of the 2023 using the information given below: 1. The Budgeted sales for the first quarter of 2023 are expected to be ZMW240,000. Since the company will be launching the same year, sales are expected to gradually pick as product awareness increases. It is assumed that 15% of the first quarter sales will be in January, 30% in February and the remainder in March. If these projections hold it is anticipated that annual sales in 2023 will be ZMW1, 000,000. 2. Clients must pay a deposit of 5% of the price when the order is made. Payments of 45% and 50% of the der price month one an month two be paid following the month of sale. The company does not plan for any defaulting customers (Bad Debts). 3. The company will employ six staff and each will be paid ZMW4,500 at the end of each month. 4. The company plans to procure materials for the jobs for a value of ZMW 100,000 in January. A deposit of 25% is payable on collections and the balance is paid in equal instalments in February and March. 5. The company will rent offices at a cost of ZMW6, 500 per month paid three months in advance at the start of the lease contract. The landlord charges a security deposit of 10% for each of three month's rent. 6. The production costs are paid in the month they are incurred and have been budget as follows: January February March ZMW 1,300 ZMW 4,200 ZMW 8,000
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