Budgets: Budgets are prepared to estimate the revenue, costs, receipts and payments for the business. There are several types of budgets prepared for a manufacturing concern. Few major types of budgets prepared by each manufacturing concert are as follows: Sales budget Cash Collection budget Production budget Raw material purchase budget Expenses Budgets Cash disbursement budget Cash Budget : The Cash budget is the final step of budgeting process. In this process the budgeted Cash collection and disbursements are shown together and budgeted cash balance is calculated for each period under the budget. To Prepare: The Cash Budget for the upcoming fiscal year Solution: The Cash Budget for the upcoming fiscal year is as follows: 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter Year Beginning Cash Balance (A) $ 20,000 $ 10,000 $ 35,800 $ 25,800 Total Cash Receipts (B) $ 180,000 $ 330,000 $210,000 $230,000 $ 950,000 Total Cash Disbursements (C) $ 260,000 $ 230,000 $220,000 $240,000 $ 950,000 Cash Surplus / (Deficit) (D) = A+B-C= $ (60,000) $ 110,000 $ 25,800 $ 15,800 Loans: Borrowings (at the beginning of the quarter )(E) $ 70,000 $ - $ - $ - $ 70,000 (60000+10000) Repayments (at the end of quarter) (F) $ - $ 70,000 $ - $ - $ 70,000 Interest Payment (G) $ - $ 4,200 $ - $ - $ 4,200 (700003%2) Ending Cash Balance (D+E-F-G) $ 10,000 $ 35,800 $ 25,800 $ 15,800 $ 15,800 Note: The ending cash balance of last quarter becomes the beginning cash balance of next quarter. The Borrowing for the 1 s t quarter are made 60,000 +10,000 = 70,000 to make the deficit good and keep the minimum required ending cash balance of $10,000. Repayment of the loan $70,000 is made in the 2 n d quarter, because there is sufficient cash surplus of $110,000. And the interest is calculated for 2 quarters as the loan was taken in the beginning of 1 s t quarter and being paid at the end of 2 n d quarter. The interest is calculated as 2% of 70,000 for 2 periods = $4,200

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