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Cash Budget Example

I have already explained that cash budgeting is estimation of future receipts and payments of cash. It is helpful to analyze the flow of cash. It is also helpful to plan and control our expenses payment. With this, we can find future need of cash.

In cash budget, first of all, we estimates our all incomes like cash from sales, cash from interest, dividends and other receipts. After this, we estimates our all expenses. If our cash receipts are less than total cash payment, we may take decision to get cash through loan.

Today, we will focus on one cash budget example because we think, examples might be simplified to improve reading and basic understanding of any topic of accounting.

Example . From the following forecasts of income and expenditure, prepare a cash budget for the months Jan. to April 2011.


Months Sales (Credit) Purchase (Credit) Wages Manufacturing expenses Administrative expenses Selling expenses
2010 Nov. 30000 15000 3000 1150 1060 500
Dec. 35000 20000 3200 1225 1040 550
2011 Jan. 25000 15000 2500 990 1100 600
Feb. 30000 20000 3000 1050 1150 620
March 35000 22500 2400 1100 1220 570
April 40000 25000 2600 1200 1180 710

Additional information in follows :

1. The customers  are allowed a credit period of two months.

2. A dividend of $ 10000 in payable April.

3. Capital expenditure which has to be incurred  : 15th Jan. $ 5000, we will buy a plant and in march, we will buy a building on loan and its payment will be done with in monthly installments of $ 2000 each.

4. The creditor are allowing a credit of 2 months.

5. Wages are paid on the 1st of the next months.

6. Lag in payment of other expenses is one month.

7. Balance of cash in hand on 1st Jan. 2011 is $ 15000.

COMMENTS

: 8
  1. how to prepare adjustments in lag of payment for one
    and half month

    ReplyDelete
  2. Please provide the journal entries for all he postings in this question

    ReplyDelete
  3. How to calculate lag in payment of wages for 1 week in cash budget?

    ReplyDelete
  4. I need help to prepare the cash budget with following data
    credit sale:160960
    cash sales:122104
    receive from a/r:97546
    wage: 60000
    office furniture:12109
    prepayment: 4722
    administrative expenses: 18818
    depreciation on office furniture: 1454
    depreciation on PPE :35000
    provision for doubtful debt: 1454
    receipt of loan: 20000
    credit purchase: 85450
    payment of account payable: 69110
    accrued wage and other expenses: 9854
    payments other: 1597
    cash balance 106826

    ReplyDelete
  5. I need some more examples with simple adjustments

    ReplyDelete
  6. Sir when it says there is no lag in payment of wages and other expenses so, we will not put it in payment option?

    ReplyDelete
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Accounting Education: Cash Budget Example
Cash Budget Example
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Accounting Education
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