Required: Preparing the cash budget for 2022 on the months of July, August and September, with comments on it
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.
If you have the following data for the purpose of preparing the
1) Expected monthly sales in 2022: June 100000, July 80000, August 60000, September 100000, October 80000.
2) The expected cash sales are 10%, and the forward sales are obtained on the basis of 50% in the month following the sale, 20% in the month following the sale, 30% in the third month, and a
3) The Gross Profit Ratio is 40%
4) The company will purchase monthly raw materials on the basis of the sales of the following month, and the purchase price will be paid in the month following the purchase.
5) The fixed expenses amount to 36000 riyals distributed equally over the months of the year
6) The monthly consumption is estimated at 2000 riyals
7) Variable payments amount to 10% of the sales value, 50% of which is paid in the same month, and the rest in the immediately following month.
8) The company will purchase a new machine in June for a value of 20,000 riyals, of which 50% will be paid in cash, then a grace period will be given, provided that the rest is paid in two equal payments. The company also plans to purchase a new machine at an amount of 190,000 riyals in the month of October.
9) The cash balance at the end of June is 2000 riyals, and the minimum cash requirement is 1,000 riyals, "the minimum amount of cash to be kept".
10) The company will obtain loans amounting to 48000 riyals at the beginning of July at an annual interest rate of 5%, and the loan and its interest will be paid off at the end of September.
11) The value of the net fixed assets amounted to 8000 riyals at the end of June, and it is expected that the company will purchase other fixed assets in the month of October to be paid in December.
12) The company will make annual dividends to shareholders in the month of August, amounting to 20,000 riyals
Required:
Preparing the cash budget for 2022 on the months of July, August and September, with comments on it
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
