CASH BUDGET

Cash budget

Cash budget shows the estimate of cash receipts and cash payments from all sources over a specific period. This is also called as Finance Budget.

Steps in the preparation of cash budget

Take opening cash balance

Add the estimated total cash receipts for the month

Calculate the total cash available for the month

Less the estimated total cash payments during the month

Calculate the closing cash balance

commission, dividend etc. Sale of assets Loans borrowed Proceeds from issue of shares/debentures

Total cash available during the month (A) Less: Estimated cash payments : Cash purchases Payable to suppliers Business expenses wages, office expenses, selling expenses, etc Business Payments Interest paid, income tax, dividend etc. Purchase of assets Repayment of loans Redemption of shares/debentures Total cash payments during the month (B)

Ex.1. Prepare a cash budget for the months of January, February, March 2010 from the following information:
1) Opening cash balance in Jan ` 25000. 2) Cash sales for Jan `.205000; Feb `.305000 and Mar `.700000.

3) Wages payable `.75000 every month.

4) Interest receivable `.1500 in the month of August. 5) Purchase of furniture for `.68000 in Feb. 6) Salary Paid ` 25000 every month 6) Cash Purchases for Jan `.85000; Feb `.90000 and Mar `.44000.
Closing cash balance (A-B) 45000 92000 649500

Ex.2 From the following information, prepare a budget for three months from March 2010. 1) Opening cash balance in March `.3000. 2) Cash Sales March: `.35,000; April: `.27,000; May : `.24,000. 3) Credit purchases March `.15,000; April `.20,000; May `.18,000; June `.16,000. The period of credit allowed by suppliers is one month. 4) Dividend to be received in May `.5,000.

5) Advance tax `.3,500 payable in April.

6) Sale of an old asset for `.24,000 during November

Ex.3 a company is expecting to have `. 57,000 cash in hand on 1st April 2003 and it require you to prepare an estimate of cash position in respect of three months from April to June 2003, from the information given below: Month Feb March April May June Sales 250000 150000 200000 250000 175000 Purchases 85000 75000 85000 78200 82200 Wages 15000 25000 24410 25501 25000 Office Expenses 25000 10000 20000 30000 40000

Additional Information 1.Credit allowed by suppliers is two months. 2.Credit allowed to customers is one month. 3.Office expenses & Wages are payable in the same month 4.Dividend `.10000 is receivable in April. 5.Interest payable in May `.10800.
Closing cash balance (A-B)

107590

207089

347089

Ex.4. Wind International Co. wishes to prepare cash budget from J anuary. Prepare a cash budget for the first six months from the following estimated revenue and expenses:
Total Sales 250000 350000 450000 550000 650000 750000 Production Expenses 20000 20000 15000 10000 5000 10000 Office & Administrative Expenses 10000 10000 10000 10000 10000 10000 Selling & Distribution Expenses 15222 13522 11822 10122 8422 6722

Month J anuary February March April May J une

Purchases 75000 85000 95000 105000 115000 125000

Additional Information 1. Cash balance on 1st J anuary w as ` . 55,000. 2. New m achinery is t o be inst alled at ` . 15,000 on credit , t o be repaid by t w o equal inst allm ent s in March and April. 3. Sales com m ission @ 10 % on t ot al sales is t o be paid w it hin a m ont h of follow ing act ual sales. 4. ` . 5,000 being t he am ount of 2nd call m ay be received in March. Share Prem ium am ount ing t o ` . 1,000 is also obt ainable w it h t he 2nd call. 5. Period of credit allow ed by suppliers - 2 m ont hs. 6. Period of credit allow ed t o cust om ers - 1 m ont h. 7. Delay in paym ent of overheads - 1 m ont h. 8. Assum e cash sales t o be 25 % of t ot al sales.
Closing cash balance (A-B)

117500

323978

550656

858034

1259612

1737890