Required: Prepare Monthly cash budget for the three months ending December 2022
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.
HH Company is in the process of preparing the
|
|
Sept |
Oct |
Nov |
Dec |
|
Projected sales quantity (units) |
60,000 |
65,000 |
65,000 |
70,000 |
Additional information:
- Selling price is ksh 120 per unit but expected to drop by 5% from 1st
- Payment for goods sold is as follows;
- 20% in the month of sales,
- 70% the following month after sales and
- The balance in the second month after sales.
Bad debt is estimated at 3% of sales value.- Purchases of goods at ksh 65 per unit are as follows:
- September 88,000 units,
- October 84,000 units,
- November 95,000 units and
- December 80,000 units.
- Goods purchased are paid one month in arrears.
- Monthly expenses estimated at 15% on sales revenue are paid in the month of incurrence.
- The company plans to buy a delivery van at ksh 2,700,000, 40% of the cost to be paid in October and the balance in January 2023.
- The Director withdraws ksh 350,000 monthly for personal expenses.
- Extracts from August figures are as follows:
- Debtors ksh 6,600,000 out of which ksh 1,800,000 is part of July sales before bad debt
- Creditors for goods ksh 5,200,000
- Cash ksh 1,050,000
Required:
Prepare Monthly cash budget for the three months ending December 2022
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