Star Ltd operates a retail business where Purchases are sold at cost plus 25%. The information below are forecast for the first 4 months of the year 2020. Month Sales Labour Expenses GH¢ GH¢ GH¢ Jan 40,000 3,000 4,000 Feb 60,000 3,000 6,000 Mar 160,000 5,000 7,000 Apr 120,000 4,000 7,000 It is management policy to have stock in hand at the end of each month to meet sales demand in the next half month Creditors for materials and expenses are paid in the month after the purchases are made and expenses incurred; labour is paid in full at the end of each month. Labour cost and expenses are
Star Ltd operates a retail business where Purchases are sold at cost plus 25%.
The information below are
Month Sales Labour Expenses
GH¢ GH¢ GH¢
Jan 40,000 3,000 4,000
Feb 60,000 3,000 6,000
Mar 160,000 5,000 7,000
Apr 120,000 4,000 7,000
- It is management policy to have stock in hand at the end of each month to meet sales demand in the next half month
- Creditors for materials and expenses are paid in the month after the purchases are made and expenses incurred; labour is paid in full at the end of each month. Labour cost and expenses are treated as period cost in the P & L Accounts.
- Expenses include a monthly
depreciation charge of GHS2,000.00 - 75% of sales are for cash and 25% of Sales are one month credit.
- The company will buy equipment for cash costing GHS18,000.00 in February and will pay a dividend of GHS20,000.00 in March, the opening Cash balance at 1st February, is GHS1,000.00
Required:
- Prepare a
Cash Budget for February and March - Prepare Profit or Loss Accounts for February and March
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