The Hamdan Accounting Associates are preparing their cash budget for the four months ending April 30, 2020. The credit department has compiled the following financial data: a) Credit sales are budgeted at: Jan Feb March April CREDIT SALES 8,000 15,000 20,000 25,000 b) The collection of the credit sales has been established by the credit department as follows: 1) 40% of the credit sales will be collected in the month of sale, 2) 30% of the credit sales will be collected in the first month after sale 3) 20% of the credit sales will be collected in the second month after sale. c) The cost of purchases of raw materials is budgeted at: Purchases Materials 3,000 3,000 4,000 5,000 d) Wages are budgeted at: Wages 2,000 1,000 1,000 1,000 e) Overhead costs are budgeted at: Overhead costs 1,000 1,000 1,000 1,000 f) Income taxes are budgeted to be paid: Taxes 2,000 g) The cash on hand at the (Jan1) beginning of the year amounted to $2,000 Required: a) Prepare the cash budget for the four months ended April 30, 2020. b)Using the information above, what is the amount uncollected each month?
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.
The Hamdan Accounting Associates are preparing their
a) Credit sales are budgeted at:
|
|
Jan |
Feb |
March |
April |
|
CREDIT SALES |
8,000 |
15,000 |
20,000 |
25,000 |
b) The collection of the credit sales has been established by the credit department as follows:
1) 40% of the credit sales will be collected in the month of sale,
2) 30% of the credit sales will be collected in the first month after sale
3) 20% of the credit sales will be collected in the second month after sale.
c) The cost of purchases of raw materials is budgeted at:
|
Purchases Materials |
3,000 |
3,000 |
4,000 |
5,000 |
d) Wages are budgeted at:
|
Wages |
2,000 |
1,000 |
1,000 |
1,000 |
e) Overhead costs are budgeted at:
|
Overhead costs |
1,000 |
1,000 |
1,000 |
1,000 |
f) Income taxes are budgeted to be paid:
|
Taxes |
|
|
2,000 |
|
g) The cash on hand at the (Jan1) beginning of the year amounted to $2,000
Required:
a) Prepare the cash budget for the four months ended April 30, 2020.
b)Using the information above, what is the amount uncollected each month?
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