During the first 6 months of the business, Surya is confident of making a large sale each month to a trading business with whom he has already been negotiating. From then on, Surya will start to make sales as a result of recommendations and advertisements he plans to place in tv and radio stations. Surya invested £10,000 as capital in the business. a. He anticipates that sales during the six months to 31 December 2022 will be made at a gross profit of 35%. He estimates they will be as follows: Forecast sales July £3,800 August £2,890 September £2,050 October £3,450 November £5,000 December £2,680 b. In addition to making purchases to meet sales, Surya plans to purchase, in July 2022, a stock of silk/ linen shirts for £2,680, so that he can meet any unexpected one-off orders. c. Sales will be made on one month’s credit terms. d. Purchases credit terms: 20 % cash in the same month, 30% next month and remainder in 2 months’ time. e. Other expenses are as follows: Telephone costs £420 per quarter, payable in arrears Electricity £725 per quarter, payable in arrears Accountant’s fees £250 per month, payable in the same month Other expenses £90 per month f. Surya plans to make drawings of £725 each month. g. In July 2022, Surya’s mother will make a loan to the business of £15,000. The loan will carry interest @ 8%, which will be payable annually in arrears, with the first interest payment being due on 30th June, 2023. Surya plans to use £9,500 of the loan to buy a van later in the year, probably in November. Till then, delivery costs will be £120 per month for July till October. Prepare the CASH BUDGET for Surya Trading for the six months ended 31 December, 2022.

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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During the first 6 months of the business, Surya is confident of making a large sale each month to a trading business with whom he has already been negotiating. From then on, Surya will start to make sales as a result of recommendations and advertisements he plans to place in tv and radio stations. Surya invested £10,000 as capital in the business. a. He anticipates that sales during the six months to 31 December 2022 will be made at a gross profit of 35%. He estimates they will be as follows: Forecast sales July £3,800 August £2,890 September £2,050 October £3,450 November £5,000 December £2,680 b. In addition to making purchases to meet sales, Surya plans to purchase, in July 2022, a stock of silk/ linen shirts for £2,680, so that he can meet any unexpected one-off orders. c. Sales will be made on one month’s credit terms. d. Purchases credit terms: 20 % cash in the same month, 30% next month and remainder in 2 months’ time. e. Other expenses are as follows: Telephone costs £420 per quarter, payable in arrears Electricity £725 per quarter, payable in arrears Accountant’s fees £250 per month, payable in the same month Other expenses £90 per month f. Surya plans to make drawings of £725 each month. g. In July 2022, Surya’s mother will make a loan to the business of £15,000. The loan will carry interest @ 8%, which will be payable annually in arrears, with the first interest payment being due on 30th June, 2023. Surya plans to use £9,500 of the loan to buy a van later in the year, probably in November. Till then, delivery costs will be £120 per month for July till October. Prepare the CASH BUDGET for Surya Trading for the six months ended 31 December, 2022.

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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