The business needs to have a sense of its future cashflows and therefore requires the preparation of the following: 1. A schedule of expected cash disbursements for accounts payable (purchases on account)for each of the months October to December.
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.
The
preparing the
business to borrow money during this quarter. Extracts from the sales and purchases budgets are
as follows:
Month cash sales sales on account purchases
August $85,000 $640,000 $420,000
September $70,000 $550,000 $550,000
October $88,550 $600,000 $500,000
November $77,160 $800,000 $600,000
December $174,870 $500,000 $450,000
ii) Expected purchases include monthly cash purchases of 5%. All other purchases are on account. Accounts payable are settled as follows, in accordance with the credit terms –
2/30, n60:
60% in the month in which the inventory is purchased
40% in the following month
Required:
(a) The business needs to have a sense of its future cashflows and therefore requires the
preparation of the following:
1. A schedule of expected cash disbursements for accounts payable (purchases on account)for each of the months October to December.
Step by step
Solved in 3 steps
