CASH BUDGET WORKSHEET

Problem 1
From the information below, prepare a cash budget for the period from January to
April.
Expected Sales Expected Purchase

$ $

Jan. 60,000 Jan. 48,000

Feb. 40,000 Feb. 80,000

Mar. 45,000 Mar. 81,000

Apr. 40,000 Apr. 90,000

The wages to be paid to workers amount to $5,000 each month. Also, the bank
balance on 1st January was $8,000. The management decided on the following:
• If the deficit fund is within the limit of $10,000, it is possible to make
arrangements with the bank.
• If the deficit fund exceeds $10,000 but is within the limit of $42,000, the
issue of debentures is preferred.
• If the deficit fund exceeds $42,000, the issue of shares is preferred
(considering the fact that it is within the limit of authorized capital).
Solution
Particulars Jan. Feb. Mar. Apr.

Receipts: $ $ $ $

Opening balance 8,000 15,000 – –

Sales 60,000 40,000 45,000 40,000

Issue of debentures – 30,000 41,000 –

Issue of shares – – – 55,000

Total 68,000 85,000 86,000 95,000

Less: Payments

Purchases 48,000 80,000 81,000 90,000

Wages 5,000 5,000 5,000 5,000

Closing cash 53,000 85,000 86,000 95,000

15,000 – – –
Problem 2
From the information below, prepare a cash budget for a company for April, May,
and June 2019 in a columnar form.

Month Sales Purchases Wages Exp.

Jan. (actual) 80,000 45,000 20,000 5,000

Feb. (actual) 80,000 40,000 18,000 6,000

Mar. (actual) 75,000 42,000 22,000 6,000

Apr. Budget 90,000 50,000 24,000 6,000

May Budget 85,000 45,000 20,000 6,000

Jun. Budget 80,000 35,000 18,000 5,000

You are further informed that:

• 10% of purchases and 20% of sales are for cash.
• The average collection period of the company is half a month and credit
purchases are paid off regularly after one month.
• Wages are paid half monthly and the rent of $500, excluded in expense, is
paid monthly.
• Cash and bank balance on April 1 was $15,000, and the company aims to
keep it below this figure at the end of every month. The excess cash is
placed in fixed deposits.
Solution
Cash Budget for 2019

April ($) May ($) June ($)

Cash & bank balance 15,000 11,700 12,700

Add:

Cash sale (20%) 18,000 17,000 16,000

Cash collections from Drs. 66,000 70,000 66,000

99,000 98,700 94,700

Less:

Cash outflow

Cash flow (10%) 5,000 4,500 3,500

Payment of Crs. 37,800 45,000 40,500

Wages 23,000 22,000 19,000

Rent 500 500 500

Exp. 6,000 6,000 6,000

Fixed deposits 15,000 8,000 13,000

Cash balance (closing) 21,700 12,700 13,200

99,000 98,700 94,700

Problem 3
From the following information, prepare a monthly cash budget for the three
months ending 31st December 2019.
Sales Materials Wages Production Admin. Selling, etc
Month
($) ($) ($) ($) ($)

Jun. 3,000 1,800 650 225 160

Jul. 3,250 2,000 750 225 160

Aug. 3,500 2,400 750 250 175

Sep. 3,750 2,250 750 300 175

Oct. 4,000 2,300 800 300 200

Nov. 4,250 2,500 900 350 200

Dec. 4,500 2,600 1,000 350 225

The credit terms are as follows:
• Sales — 3 months to debtors. 10% of sales are in cash. On average, 50%
of credit sales are paid on the due dates, while the other 50% are paid in the
next month.
• Creditors for material — 2 months.
The lag in payment for wages is 1/4 month and 1/2 month for overheads.
The cash and bank balance on 1st October is expected to be $1,500.
Other information is given as follows:
• Plant and machinery are to be installed in August at a cost of $24,000. This
sum will be paid in monthly installments of $500 each from 1st October.
• Preference share dividends @ 5% on $50,000 are to be paid on 1st
December.
• Calls on 250 equity shares @ $2 per share are expected on 1st November.
• Dividends from investments amounting to $250 are expected on 31st
December.
• Income tax (advance) is to be paid in December $500
Solution

Cash Budget for Three Months Ending 31 Dec. 2019

Details: Oct. ($) Nov. ($) Dec. ($)

Balance b/d 1,500.00 537.50 350.00

Receipts (estimated):

Sales 3,212.50 3,462.50 3,712.50

Capital – 500.00 –

Dividends – – 250.00

Total (A) 4,712.50 4,500 4,312.50

Payments:

Creditors 2,400.00 2,250.00 2,300.00

Wages 787.50 875.00 975.00

Overheads:

Production 300.00 325.00 350.00

Adm. S. & D. 187.50 200.00 212.50

Pref. Dividend – – 2,500.00

Income tax – – 500.00

Plant and Machinery (500 each) 5,00.00 5,00.00 5,00.00

Total (B) Year 4,175.00 4,150.00 7,337.50

Balance c/d (A – B) 537.50 350 (-3,025)

Calculation of Amount of Sales

Month Sale ($) Oct. ($) Nov. ($) December ($)

Jun. 3,000 1,350.00 – –

Jul. 3,250 1,462.50 1,462.50 –

Aug. 3,500 – 1,575.00 1,575.00

Sep. 3,750 – – 1,687.50

Oct. 4,000 400.00 – –

Nov. 4,250 – 4,250 –

Dec. 4,500 – – 450.00

Total – 3,212.50 3,462.50 3,712.50

Calculation of Wages
1/4 wages for September and 3/4 wages for October. Therefore, the calculation is:
(1/4 x 750) = 187.50
3/4 x 800 = 600
Total = 787.50
The wages for the other months can be calculated using the same approach.