Below is the information as at the end of accounting year of December 2020: Details RM Debtors 23,000 Bank 55,000 Fixed asset at cost 698,000 Accumulated depreciation 98,000 Creditors 48,000 Operating expenses for December 60,000 Sales for December 400,000 Ending inventory 20,000 Retained earnings 120,000 The following additional information was also provided to assist your work. i) Depreciation is provided at the rate of 5% on cost of non-current assets per month. ii) Closing inventory is expected to increase by RM2000 in January from December levels. This is expected to increase by the same figure in February from the projected figure in January. It is expected that in March closing inventory is desired to be RM26,000 iii) The company makes a profit of 25% on its sales. iv) Operating expenses is expected to increase by 10% from that of December in January and this is projected to increase at the same growth rate until March. v) Sales is projected to grow by 15% per month from December until March. vi) Debtors figure at the end of the month is desired to be proportional to the sales values. vii) Creditors value for the three months are expected to be as follows: January - RM50,000; February – RM46,000; March – RM52,000 REQUIRED: Prepare the following three-months (January to March 2021) budget as required by the bankers. a) The cash budget
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Below is the information as at the end of accounting year of December 2020:
Details RM
Debtors 23,000
Bank 55,000
Fixed asset at cost 698,000
Accumulated
Creditors 48,000
Operating expenses for December 60,000
Sales for December 400,000
Ending inventory 20,000
The following additional information was also provided to assist your work.
i) Depreciation is provided at the rate of 5% on cost of non-current assets per month.
ii) Closing inventory is expected to increase by RM2000 in January from December levels. This is expected to increase by the same figure in February from the projected figure in January. It is expected that in March closing inventory is desired to be RM26,000
iii) The company makes a profit of 25% on its sales.
iv) Operating expenses is expected to increase by 10% from that of December in January and this is projected to increase at the same growth rate until March.
v) Sales is projected to grow by 15% per month from December until March.
vi) Debtors figure at the end of the month is desired to be proportional to the sales values.
vii) Creditors value for the three months are expected to be as follows:
January - RM50,000; February – RM46,000; March – RM52,000
REQUIRED:
Prepare the following three-months (January to March 2021) budget as required by the bankers.
a) The
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