Patricia Smith recently leased space in the Southside Mall and opened a new business, Smith's Coi Shop. Business has been good. but Smith frequently runs out of Cash. This has necessitated late payment on certain orders, which in turn is beginning to cause a problem with suppliers. Smith plans to borrow from the bank to have cash as needed. but first she needs a forecast of just how much she must borrow. Accordingly, she has asked you to prepare a cash budget for the critical period around Christmas, when needs will be especially high. Sales are made on a cash basis only. Smith's purchases must be paid for during the month following the purchase. Smith pays herself a salary of $4,800 per month and the rent is $2,000 per month. In addition, she must make a tax payment of $12,000 in December. The current cash on hand (on December 1) is $400, but Smith has agreed to maintain an average bank balance of $6,000 this is her target cash balance. (Disregard till cash, which is insignificant because Smith keeps only a small amount on hand to lessen the chances of robbery.) The estimated sales and purchases for December, January and February are shown here. Purchases during November amounted to $140,000
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.
Patricia Smith recently leased space in the Southside Mall and opened a new business, Smith's Coi Shop. Business has been good. but Smith frequently runs out of Cash. This has necessitated late payment on certain orders, which in turn is beginning to cause a problem with suppliers. Smith plans to borrow from the bank to have cash as needed. but first she needs a
Sales are made on a cash basis only. Smith's purchases must be paid for during the month following the purchase. Smith pays herself a salary of $4,800 per month and the rent is $2,000 per month. In addition, she must make a tax payment of $12,000 in December. The current cash on hand (on December 1) is $400, but Smith has agreed to maintain an average bank balance of $6,000 this is her target cash balance. (Disregard till cash, which is insignificant because Smith keeps only a small amount on hand to lessen the chances of robbery.)
The estimated sales and purchases for December, January and February are shown here. Purchases during November amounted to $140,000
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