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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Preparing a Schedule of Cash Collections on Accounts Receivable

Kailua and Company is a legal services firm. All sales of legal services are billed to the client (there are no cash sales). Kailua expects that, on average, 20% will be paid in the month of billing, 50% will be paid in the month following billing, and 25% will be paid in the second month following billing. For the next 5 months, the following sales billings are expected:

Chapter 9, Problem 30BEA, Preparing a Schedule of Cash Collections on Accounts Receivable Kailua and Company is a legal

Required:

Prepare a schedule showing the cash expected in payments on accounts receivable in August and in September.

To determine

Present a schedule for cash collection from accounts receivables.

Explanation

Cash Budget:

Cash budget is a financial budget. It is prepared to assess inflows and outflows of cash to manage cash balance and timing related issues. Closing cash balance is computed by adding cash receipts and subtracting cash payments from the expected cash available in the beginning.

Schedule for cash collection from accounts receivables:

ParticularsAugust ($)September ($)
Cash collected from the sales of the current month

(20%×86,800)

17,360

(20%×91,000)18,200
Add: Cash collected from the sales of the preceding month (50

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