Week 5

CASH BUDGETS PRACTICE QUESTION

CS Trading Ltd has been in business since January 2018 and the company’s accountant has asked you
to prepare a cash budget for the six months July to December.

Sales for the company are expected to be as follows:

June £100,000

July £120,000

August £80,000

September £100,000

October £110,000

November £110,000

December £60,000

50% of the sales are expected to be cash sales and the remaining 50% will be to customers on a one
month credit basis.

Cost of sales (purchases) are 60% of the sales value and are paid for immediately.

Wages and salaries are paid in the month concerned and are as follows:

July £20,000

August £20,000

September £22,000

October £22,000

November £24,000

December £24,000

Rent is paid annually as a one off payment in September of £60,000

Electricity (£16,000 per annum)

is paid quarterly in arrears in September and December

The opening cash balance as at 1st July 2018 is £10,000

Required:

Prepare a cash budget for the six months to December 2021