Prepare cash budget,
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Nana Adom Company Limited is a wholesale company that deals in general goods. The
following information relates to the next budget period.
1. Expenses: (in GH¢)
October November December
Selling & distribution 20,000 30,000 34,000
General & administration 15,000 18,000 12,000
Rate 8,000 6,000 10,000
Interest charges 1,600 2,000 2,400
Expenses are payable in the month of incurrence.
2. A
3. Estimated cash balance at the end of September will be GH¢5000. Cash balances should
not be less than GH¢10,000. Cash can be borrowed in multiples of GH¢10,000 to finance
any deficit at an interest rate of 15% per annum.
4. The sales manager's salary, which is GH¢ 7000 per month is expected to increase by
GH¢1000 every month after June.
5. Motor vehicle will be purchased in November at GH¢240,000. Depreciation for motor van
should be calculated at 10% in December.
6. Credit purchases have been made as follows:
September GH¢200,000
October GH¢240,000
November GH¢200,000
December GH¢300,000
75% of purchases are paid for in the month of purchase and the remainder in the month
after purchase.
7. Details of expected sales (in units) are given below:
August 20,000
September 18,000
October 21,000
November 15,000
December 20,000
Sales are likely to be made at a unit price of GH¢ 30.
8. Cash sales is expected to be made as follows: August GH¢140,000
September GH¢100,000
October GH¢200,000
November GH¢120,000
December GH¢140,000
The pattern for the collection of debts from customers is expected to be as follows:
a. 60% in the month of sales (3% cash discount allowed).
b. 20% in the first month after the month of sale.
c. 15% in the second month after the month of sale.
d. 5% is usually regarded as bas debt
9. Excess funds are invested (in multiples of GH¢10,000) in short term securities, at an
interest rate of 20% per annum.
10. Borrowing must be paid together with any accrued interest whenever funds are available.
Prepare
end of December
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