Management Accounting

Cash Budget
BBA/ B.COM/ MBA
By Asim Kumar
 Cash Budget
A cash budget is a plan of
expected cash receipts and
disbursements during the period.
In other words, a cash budget is an
estimated projection of the
company's cash position in the
future.
 Cash Budget for …..
Particulars April May June
Rs. Rs. Rs.
Opening Cash Balance
Add: Estimated Cash Receipts:
Sales Collection from debtors
Cash Sales
Total Receipts (A)
Less: Estimated Cash Payments:
Payment to creditors
Wages
Total Payments (B)
Closing Balance
1. Bajaj Co. wishes to arrange
overdraft facilities with its bankers
during the period from April to June
2021 when it will be manufacturing
mostly for stock. Prepare a Cash
Budget for the above period from the
following data, indicating the extent
of the band overdraft facilities the
company will require at the end of
each month.
(a)
Months Sales Materials Wages
Rs. Rs. Rs.

February 90,000 62,400 6,000

March 96,000 72,000 7,000
April 54,000 1,21,000 5,500
May 87,000 1,23,000 5,000
June 63,000 1,34,000 7,500
(b) 50% of Credit sales are realized in the
month following the sales and the
remaining 50% in the second month
following.
(c) Creditors are paid in the month
following the month of purchase.
(d) Lag in payment of wages – one
month.
(e) Cash at bank on 1st April, 2021
estimated at Rs. 12,500.
Answer: Closing balance for April –
Rs. 26,500; May Rs. (25,000) and
June Rs. (82,500)
Solution.
Cash Budget for three months from
April to June, 2021
Particulars April May June
Rs. Rs Rs
Opening Cash Balance 12,500 26,500 (25,000)

Add: Estimated Cash Receipts:

Sales Collection from debtors 93,000 75,000 70,500
Total Receipts (A) 1,05,500 1,01,500 45,500

Less: Estimated Cash Payments:

Payment to creditors 72,000 1,21,000 1,23,000

Wages 7,000 5,500 5,000
Total Payments (B) 79,000 1,26,500 1,28,000

Closing Balance (A – B) 26,500 (25,000) (82,500)

1. From the following budgeted
figures prepare a Cash Budget in
respect of three months to June 30,
2021.
Months Sales Materials Wages Overheads
Rs. Rs. Rs. Rs.
January 60,000 40,000 11,000 6,200
February 56,000 48,000 11,600 6,600
March 64,000 50,000 12,000 6,800
April 80,000 56,000 12,400 7,200
May 84,000 62,000 13,000 8,600
June 76,000 50,000 14,000 8,000
Additional information:
1. Expected Cash balance on 1st April, 2021:–
Rs. 20,000
2. Materials and overheads are to
be paid during the month following
the month of supply.

3. Wages are to be paid during the

month in which they are incurred.

4. All sales are on credit basis.

5. The terms of credits are payment
by the end of the month following
the month of sales. Half of credit
sales are paid when due and the
other half to be paid within the
following month of due date.
6. 5% sales commission is to be
paid within in the month following
the month of sales
7. Preference Dividends for Rs.
30,000 is to be paid on 1st May.
8. Share call money of Rs. 25,000 is
due and received on 1st April and
1st June.
9. Plant and machinery worth Rs.
10,000 is to be installed in the
month of January and the payment
is to be made in the month of June.
Cash Budget for three months from
April to June, 2021
Particulars April May June
Rs. Rs Rs
Opening Cash Balance 20,000 32,600 (-) 5,600
Add: Estimated Cash Receipts:
Sales Collection from debtors 60,000 72,000 82,000
Share call money 25,000 25000
1,05,000 1,04,600 1,01,400

Less: Estimated Cash Payments:

Materials 50,000 56,000 62,000
Wages 12,400 13,000 14,000
Overheads 6800 7200 8600
Sales Commission 3200 4000 4200
Preference Dividend - 30,000 –
Plant and Machinery - - 10,000
72,400 1,10,200 98,800
Closing Cash Balance 32,600 (-) 5,600 2,600