Designs Ventures is a small business owned and run by Kwesi Foh from a small rented art studio at Akyem, Cape Coast. He designs and makes T-shirts for craft shops. In most months he produces and sells 1,000 T-Shirts at GH¢50 each. Kwesi would need your assistance in preparing a cash budget so that he can manage his business finances better and plan for unforeseen events that may have an impact on his business costs and revenues. He was sick a few months ago and was unable to meet some orders. As a result, his revenue was down and he has to use a bank overdraft to cover a large electricity bill. The overdraft has now been paid off but Kwesi does not want to run out of cash again. Develop a cash budget for Kwesi showing total cash in and out of his business each month and his cash balances. He currently has GH¢15,000 in his business account at a bank and has made you the list of regular outgoings shown below: Your cash budget should be for the period June to December. Quarterly bills for electricity and the telephone, and insurance premiums are payable in June, September and December. Kwesi always manages to sell more T-shirts during the Fetu Afahye festival so he has asked you to double his purchases and paints in August and double his sales revenue in September. Cash outflow Designs Ventures Amount How often? GH¢ Rent for studio 750 Each month Materials 2,500 Each month Paints 250 Each month Loan repayments 350 Each month Telephone 600 Every 3 months Bus fare 180 Each month Cleaner 200 Each month Electricity 1,500 Every 3 months Insurance 800 Every 3 months Kwesi’s wage 8,000 Each month He has also applied for a bank loan of GH¢50,000. The bank has agreed and will advance this amount in July. Repayments of GH¢5,000 per month begins in August. He will use the money to help a new equipment for GH¢25,000, also in August. Kwesi will use the machine to make new designs. Required: 1. Prepare cash budget for Designs Ventures for June to December. 2. Suggest four measures which Kwesi Foh can use to overcome any cash shortage in her business
Designs Ventures is a small business owned and run by Kwesi Foh from a small rented art studio at Akyem, Cape Coast. He designs and makes T-shirts for craft shops. In most months he produces and sells 1,000 T-Shirts at GH¢50 each.
Kwesi would need your assistance in preparing a
Develop a cash budget for Kwesi showing total cash in and out of his business each month and his cash balances. He currently has GH¢15,000 in his business account at a bank and has made you the list of regular outgoings shown below:
Your cash budget should be for the period June to December. Quarterly bills for electricity and the telephone, and insurance premiums are payable in June, September and December. Kwesi always manages to sell more T-shirts during the Fetu Afahye festival so he has asked you to double his
purchases and paints in August and double his sales revenue in September.
|
|
Designs Ventures Amount |
How often? |
|
|
|
GH¢ |
|
|
|
Rent for studio |
750 |
Each month |
|
|
Materials |
2,500 |
Each month |
|
|
Paints |
250 |
Each month |
|
|
Loan repayments |
350 |
Each month |
|
|
Telephone |
600 |
Every 3 months |
|
|
Bus fare |
180 |
Each month |
|
|
Cleaner |
200 |
Each month |
|
|
Electricity |
1,500 |
Every 3 months |
|
|
Insurance |
800 |
Every 3 months |
|
|
Kwesi’s wage |
8,000 |
Each month |
|
He has also applied for a bank loan of GH¢50,000. The bank has agreed and will advance this amount in July. Repayments of GH¢5,000 per month begins in August. He will use the money to help a new equipment for GH¢25,000, also in August. Kwesi will use the machine to make new designs.
Required:
1. Prepare cash budget for Designs Ventures for June to December.
2. Suggest four measures which Kwesi Foh can use to overcome any cash shortage in her business.
Step by step
Solved in 3 steps with 1 images
