3 A company making for stock in the first quarter of the year 2017 is assisted by its bankers with overdraft accommodation. The following are the relevant budget figures:
3 A company making for stock in the first quarter of the year 2017 is assisted by its bankers with overdraft accommodation. The following are the relevant budget figures:
Sale (Cr.) Rs. Purchases (Cr.) Rs. Wages &Expenses (Cr.) Rs.
November 2016 1,20,000 83,000 10,000
December 2016 1,28,000 96,000 10,000
January 2017 72,000 1,62,000 11,000
February 2017 1,16,000 1,64,000 10,000
March 2017 84,000 40,000 12,000
Given the following further information you are required to prepare a Cash Budget for the quarter January to March 2017, showing the budgeted amount of bank facilities required, if any, in each month end:
- a) Budgeted cash at bank on 1st January 2017 Rs. 20,000
- b) Credit terms of sales are payment by the end of the month following the month of supply. On average one half of sale are paid on due date, while the other half are paid during the next month. Creditors are paid during the month following the month of supply.
- c) Wages and expenses are paid twice a month on 1st and 16th respectively.
From the above information prepare a Cash Budget for the quarter January to March 2017, showing the budgeted amount of bank facilities required, if any, in each month end.
Answer: Cash Budget for the period ending March, 2017
Particulars | January | February | March |
Receipts | |||
Opening balance | 20,000 | 37,000 | (35,000) |
Collection from debtors | 1,24,000 | 1,00,000 | 94,000 |
A. Total | 1,44,000 | 1,37,000 | 59,000 |
Payments | |||
Payments to creditors | 96,000 | 1,62,000 | 1,64,000 |
Wages | 11,000 | 10,000 | 12,000 |
B. Total | 1,07,000 | 1,72,000 | 1,76,000 |
Closing balance (A-B) | 37,000 | (35,000) | (1,17,000) |
Overdraft needed | Nil | 35,000 | 1,17,000 |
WORKING NOTES
- Collection from debtors
As given in the question, Credit terms of sales are payment by the end of the month following the month of supply. On average one half of sale are paid on due date, while the other half are paid during the next month.
January= 50% of November and 50% of December
February= 50% of December and 50% of January
March= 50% of January and 50% of February
- Payments to creditors
As given in the question, Creditors are paid during the month following the month of supply.
January= Purchases of December
February= Purchases of January
March= Purchases of February
- Wages payment
According to the question, they are paying wages in the same month so we take amount of wages of current months only i.e. January month wages are Rs.11,000 so we consider Rs.11,000 paid in January only.
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