Of vital importance to the company’s operations is the efficient management of its cash resources. Consequently your are asked to look into the cash management procedures and prepare an appropriate report. The following information is relevant for the current period: Opening Cash Balance $ 30,000 Required Minimum Cash Balance $ 20,000 Payment of Income taxes – 2nd Quarter $ 4,000 Professional Salaries; 1st Quarter $ 145,000 2nd Quarter $ 145,000 Interest from Investments- 2nd Quarter $ 7,000 Overhead Costs 1st Quarter $ 95,000 2nd Quarter $ 120,000 Selling & Administration Costs 1st Quarter $ 50,000 2nd Quarter $ 70,000 These costs include depreciation of $ 3,000 Purchase of Equipment – 2nd Quarter $ 50,000 Sale of Equipment – 1st Quarter $ 12,000 Collections from Customers 1st Quarter $ 245,000 2nd Quarter $ 390,000 Interest Payments – 2nd Quarter $ 400 You are required to: Prepare a Cash Budget for the first two quarters of the year.
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.
Of vital importance to the company’s operations is the efficient management of its cash resources.
Consequently your are asked to look into the cash management procedures and prepare an appropriate report.
The following information is relevant for the current period:
Opening Cash Balance $ 30,000
Required Minimum Cash Balance $ 20,000
Payment of Income taxes – 2nd Quarter $ 4,000
Professional Salaries;
1st Quarter $ 145,000
2nd Quarter $ 145,000
Interest from Investments- 2nd Quarter $ 7,000
1st Quarter $ 95,000
2nd Quarter $ 120,000
Selling & Administration Costs
1st Quarter $ 50,000
2nd Quarter $ 70,000
These costs include
Purchase of Equipment – 2nd Quarter $ 50,000
Sale of Equipment – 1st Quarter $ 12,000
Collections from Customers
1st Quarter $ 245,000
2nd Quarter $ 390,000
Interest Payments – 2nd Quarter $ 400
You are required to:
Prepare a
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