Assume a company is preparing a budget for its first two months of operations. During the first and second months it expects credit sales of $40,000 and $77,000, respectively. The company expects to collect 30% of its credit sales in the month of the sale and the remaining 70% in the following month. What is the expected cash collections from credit sales during the first month?
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.
Assume a company is preparing a budget for its first two months of operations. During the first and second months it expects credit sales of $40,000 and $77,000, respectively. The company expects to collect 30% of its credit sales in the month of the sale and the remaining 70% in the following month. What is the expected cash collections from credit sales during the first month?
Cash collection budget :— This budget is prepared to estimate the cash collection of credit sales from customers during the period. Collection of credit sales is calculated by multiplying credit sales by the percentage of collection during the period.
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