Cash Budgeting Examples.

Cash Budget Particulars 1 CASH INFLOWS: Collection from debtors From Current sales (2/3 of quarter's sales) 5,000 From Prior sales (1/3 of the last quarter's3,000 sales) Total Cash Inflows during the year 8,000 CASH OUTFLOWS: Production cost 7,000 Selling and Administrative cost 1,000 Purchases of plant and other fixed assets 100 Total Cash Outflow during the year 8,100 Surplus / (Difficiency) (100) Add: Cash (at start) 650 Balance 550 Borrowing made during the year Payment of Loan Ending Cash in hand

Quarters 2

3

4

7,000 2,500 9,500

12,000 3,500 15,500

7,000 6,000 13,000

10,000 2,000 1,100 13,100 (3,600) 550 (3,050) 3,550

8,000 2,900 2,100 13,000 2,500 500 3,000 -

8,500 1,600 2,100 12,200 800 500 1,300

550

500

(2,500) 500

(800) 500

Borrowing = Negative balance + Desired ending cash balance. Payment of loan = Surplus cash - Desired ending cash balance.

1 Minimum required cash balance 2 Cash at start of the year

500 650 Q1

a Cash inflow during the year b Cash outflow during the year Surplus / (Deficiency) c add: Cash (at start) Balance of cash d add: Borrowing during the period e less: Repayment of loan Balance / Required cash (at end)

Q2 8,000 8,100 (100) 650 550 550

9,500 13,100 (3,600) 550 (3,050) 3,550 500

Q3 Q4 15,500 13,000 13,000 12,200 2,500 800 500 500 3,000 1,300 2,500 500

800 500

Borrowing = Negative balance + Required cash

Total 46,000 46,400 (400) 650 250 3,550 3,300 500

Particulars January CASH INFLOWS: Cash Sales (40% of total sales) Collection from debtors (One month after sales)

Month February

March

16,000

18,000

22,000

30,000

24,000

27,000

Total Cash Inflows

46,000

42,000

49,000

CASH OUTFLOWS: Payment for the purchase of merchandise Sales Commission (5% of sales) Fixed cost (excluding depreciation)

14,000 3,500 3,000

33,000 2,000 3,000

36,000 2,250 3,000

TOTAL CASH OUTFLOW

20,500

38,000

41,250

Surplus / (Difficiency)

25,500

4,000

7,750

Cash (at start) Cash (at end)

7,500 33,000

33,000 37,000

37,000 44,750

Working of Purchases:

Cost of goods sold (60% of current sales) Add: Desired ending inventory (60% of sales) Total Less: Opening inventory Purchases

January February March 24,000 27,000 33,000 60,000 69,000 66,000 84,000 96,000 99,000 (51,000) (60,000) (69,000) 33,000 36,000 30,000

CASH INFLOWS Collection from Sales a) Cash Sales for April

(Rs. 170,000 x 20%)

b) Collection from debtors (Credit Sales) From Feburary Sales (Rs. 120,000 x 80% = Rs. 96,000 x 25%) From March Sales (Rs. 150,000 x 80% = Rs. 120,000 x 30%) From April Sales (Rs. 170,000 x 80% = Rs. 136,000 x 40%) Total Cash Inflow during the year CASH OUTFLOW Payment for purchases March purchases April purchases Payment of selling and admin exp.

(Rs.100,000 x 98% = 98,000 x 1/2) (Rs. 30,408 x 98% = 29,800 x 1/2) (Rs. 45,000 - Rs. 10,000)

Total Cash Outflow during the year SURPLUS / (DIFFICIENCY) Add: Cash balance (at start) Budget Cash (at end)

Add:

Purchase Budget: Cost of Sales - April Desired ending inventory Less: Expected opening inventory

(Rs. 170,000 x 50%) (Rs. 140,000 x 50% = 70,000 x 2.5 times) Total (Rs. 225,000 / 98%) Purchase budget

34,000

24,000 36,000 54,400 148,400

49,000 14,700 35,000 98,700 49,700 30,000 79,700 Gross Net 85,000 83,300 (Rs. 85,000 x 98%) 175,000 171,500 (Rs. 175,000 x 98%) 260,000 254,800 (229,592) (225,000) 30,408 29,800

Required 1 Cash collection in Feburary Collection from Feb Sales Collection from Jan Sales Collection from Dec Sales Cash collection in Working

(Rs. 54,000 x 55%) (Rs. 65,000 x 30%) (Rs. 87,000 x 13%) Feburary

Calculation of Dec Sales: The amount of Dec sales was collected in the month Dec is 55%. Therefore the remaining % of Dec Sales at Dec 31 or Jan 1 is 45% Balance of A/Rec (Dec) is Rs. 39,150 at Jan 01 which is 45% of sales Sales of December was

Rs. 39,150 / 45%

87,000

Required no. 2: Cash Budget - January CASH INFLOW: Collection from Jan Sales Collection from Dec Sales Collection from Nov Sales CASH INFLOW

(Rs. 65,000 x 55%) (Rs. 87,000 x 30%) (Rs. 90,000 x 13%) (Jan)

CASH OUTFLOW: Cash payment for the purchases of merchandise Cash payment for the expenses of Jan CASH OUTFLOW (Jan)

35,750 26,100 11,700 73,550

10,000 41,000 51,000

Surplus Add: Cash (at start) CASH (at End) - Jan 31 / Feb 01

22,550 5,000 27,550

Working: Calculation of Nov. Sales: The amount of Nov sales was collected in the month Nov is 55% and in Dec 30% Therefore the remaining % of Nov. Sales at Dec 31 or Jan 1 is 15%

Balance of A/Rec (Nov.) is Rs. 13,500 at Jan 01 which is 15% of sales Sales of November was

Rs. 13,500 / 15%

90,000

Required no. 3: Cash Budget - Feb CASH INFLOW: CASH INFLOW (Feb.)

60,510

CASH OUTFLOW: Cash payment for the purchases of merchandise Cash payment for the expenses of Jan CASH OUTFLOW (Feb)

12,500 41,000 53,500

Surplus Add: Cash (at start) CASH (at End) - Feb 28

7,010 27,550 34,560

29,700 19,500 11,310 60,510

ec is 55%. an 1 is 45%

s 45% of sales

5% and in Dec 30%

Required no:1 Cash Collected in 19 B, resulting from sales of 19 A and 19 B a) Cash collected from 19 A Sales: Balance of account receivable (at start) b) Cash collected from 19 B sales: i) Cash Sales (1,200,000 x 20%) ii) Credit Sales (1,200,000 x 80%) Less: Bad debts Less: Account receivable (at end)

240,000 960,000 (5,000) (78,000)

877,000

Cash collected from 19 B sales Total Cash collected in 19 B

Required no.2: Cash disbrusment on 19 B for purchases of merchandise: a) Calculate the amount of purchases in 19 B Cost of goods sold 840,000 Add: Inventory (at end) 140,000 Total inventory available for sales 980,000 Less: Inventory (at start) (150,000) Purchase in 19 B 830,000 b) Calculate the amount of payment: Account payable (at start) Add: Purchase during the year

95,000 830,000

Total account payable Less: Account payable (at end) Payment to account payable for purchase of merchandise 19 B

925,000 (98,000) 827,000

Required no.3: Cash disbrusement in 19 B for variable and fixed expenses: 1) Payment of Variable Expenses in 19 B: For 19 A Variable Expenses (110,000 x 50%) For 19 B Variable Expenses (120,000 x 50%) Payment of Variable Expenses in 19B:

55,000 60,000 115,000

Working: % of Variable expenses to Sales = Variable Expenses / Sales For 19 B = 120,000 / 1,200,000 x 100 Variable Expenses = 10% of sales

Sales of 19 A is Rs. 1,100,000. Therefore Variable expenses for 19 A was: Variable Expenses = 1,100,000 x 10% Variable Expenses of 19 A

= 110,000

2) Payment of Fixed Expenses in 19 B: For 19 A Fixed Expenses

(60,000 x 20%)

12,000

For 19 B Fixed Expenses (60,000 x 80%) Payment of Fixed Expenses in 19 B

48,000 60,000

Working: Fixed Expenses (Cash payment only) Total amount of fixed expenses Less: Non- Cash Expenses: a) Depreciation 35,000 b) Bad Debt 5,000 Cash Fixed Expenses

100,000

(40,000) 60,000

Total Cash Disbursed during 19 B Variable Expenses Fixed Expenses

115,000 60,000 175,000

84,000

1,117,000 1,201,000

r 19 A was:

Required no.1: Cash Disbursed during the month of June: 1 Payment for purchase of merchandise: For May For June

(11,250 units x Rs. 20 = Rs. 225,000 x 46%) (12,180 units x Rs. 20 = Rs. 243,600 x 54%)

103,500 131,544

2 Payment of Marketing, General and Admin Expenses: For May For June

(51,550 x 46%) (49,300 x 54%)

23,713 26,622

3 Payment of Wages and Salaries: TOTAL CASH DISBURSED IN JUNE

WORKING: 1) Calculation of purchases for the month of May: (in units) Material needed in production in May 11,900 add: Desired ending R/M (130%) 14,820 26,720 less: Expected opening R/M (15,470) Purchases (in May) 11,250

(11,400 x 130%) (Rs. 309,400 / Rs. 20)

2) Calculation of purchases for the month of June:

Material needed in production in June add: Desired ending R/M (130%) less: Expected opening R/M Purchases (in June)

(in units) 11,400 15,600 27,000 (14,820) 12,180

(12,000 x 130%)

3) Calculation of Expenses for May and June: Operating Expenses are 15% of current month sales Sales in May

357,000

Sales in June

Operating Expenses = 357,000 x 15% Operating Expenses 53,550 Less: Non-cash item Depreciation (2,000)

Operating Expenses = 342,000 x 15 Operating Expenses Less: Non-cash item Depreciation

Operating Expenses (Cash Basis)

Operating Expenses (Cash Basis)

51,550

4) Calculation of payment of wages and salaries: Total payroll in June

38,000

add: Accured payrol (at start) Total Payable less: Accured payrol (at end) Payment of Wages paid in June

3,300 41,300 (3,400) 37,900

Required no. 2: Cash collection in the month of May: Cash collected from sales in the month of March

(354,000 x 9%)

Cash collected from sales in the month of April: a) Within discount period (363,000 x 60% = 217,800 x 97%) b) At the end of month (363,000 x 25% x 100%) CASH COLLECTED IN MAY

235,044

50,335 37,900 323,279

342,000

xpenses = 342,000 x 15% 51,300 (2,000) 49,300

31,860

211,266 90,750 333,876