You have been asked to prepare a December Cash Budget for Ashton Company, a distributor of exercise equipment. The following information is available about the company’s operations: a) The cash balance on December 1st is Rs. 40,000. b) Actual sales for October and November and expected sales for December are as follows: October November December Cash Sales Rs. 65,000 Rs. 70,000 Rs. 83,000 Sales on Account Rs. 400,000 Rs. 525,000 Rs. 600,000 Sales on account are collected over a three month period: 20% collected in the month of sale, 60% collected in the month following sale, 18% collected in the second month following sale, and The remaining is uncollectible. c) The purchases of inventory will total Rs. 280,000 for December. 30% of a month’s inventory purchases are made during the month of purchase. The accounts payable remaining from November’s inventory purchases total Rs. 161,000, all of which will be paid in December. d) Selling and administrative expenses are budgeted at Rs. 430,000 for December. Of this amount, Rs. 50,000 is for depreciation. e) A new Web server for the Marketing Department costing Rs. 76,000 will be purchased for cash during December and Dividends costing Rs. 9,000 will be paid during the month. f) The company maintains a minimum cash balance of Rs. 20,000. An open line of credit is available from the company’s bank to bolster the cash position as needed. Required: 1- Prepare a schedule of expected cash collection for December. 2- Prepare a schedule of expected cash disbursements for merchandise purchase for December. 3- Prepare a cash budget for December.
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.
You have been asked to prepare a December
- a) The cash balance on December 1st is Rs. 40,000.
- b) Actual sales for October and November and expected sales for December are as follows:
October November December
Cash Sales Rs. 65,000 Rs. 70,000 Rs. 83,000
Sales on Account Rs. 400,000 Rs. 525,000 Rs. 600,000
Sales on account are collected over a three month period:
20% collected in the month of sale,
60% collected in the month following sale,
18% collected in the second month following sale, and
The remaining is uncollectible.
- c) The purchases of inventory will total Rs. 280,000 for December. 30% of a month’s inventory purchases are made during the month of purchase. The accounts payable remaining from November’s inventory purchases total Rs. 161,000, all of which will be paid in December.
- d) Selling and administrative expenses are budgeted at Rs. 430,000 for December. Of this amount, Rs. 50,000 is for
depreciation. - e) A new Web server for the Marketing Department costing Rs. 76,000 will be purchased for cash during December and Dividends costing Rs. 9,000 will be paid during the month.
- f) The company maintains a minimum cash balance of Rs. 20,000. An open line of credit is available from the company’s bank to bolster the cash position as needed.
Required:
1- Prepare a schedule of expected cash collection for December.
2- Prepare a schedule of expected cash disbursements for merchandise purchase for December.
3- Prepare a cash budget for December.
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