Directorate: Curriculum FET

Grade 11 ACCOUNTING Term 3: Week 7

TOPIC: Budgeting
In Gr 10 and 11 you learnt about ...
basic budgeting concepts | forecasting | cash budget | zero based budget | capital budget | long-term budget |
medium-term budget | budget period | cash surplus | cash shortfall | debtors collection schedule
This lesson will enable you to...
• understanding the concepts related to budgets
• prepare a debtors collection schedule
• prepare and present a Cash Budget for a sole trader
• prepare a Projected Income Statement

Use your Textbook to read about Lucem Publishers Gr 11 Teachers Guide

Budgeting:
• purpose of Cash Budget
• preparing Debtors Collection Schedules
• purpose of Projected Income Statement
You may also refer to the digital resources
listed here.
((textbook & answer book in one)
https://wcedeportal.co.za/eresource/116641
(Pg. 234 - 263)
Study & Master Gr 11 PPT (Ch 11)
https://wcedeportal.co.za/eresource/133321
PPT presentation on Budgeting
2019 Telematics Gr 11 Budgeting
https://wcedeportal.co.za/eresource/136291

ACTIVITY 1 (Refresh your memory!)

Complete the following sentences. Write only the word(s) next to the question numbers in the
ANSWER BOOK.

1.1 The main purpose of preparing a cash budget is …

1.2 The main purpose of preparing a projected income statement is …
1.3 … is an example of an item that will appear in a cash budget and not in a projected income
statement.
1.4 … is an example of an item that will appear in a projected income statement but not in a
cash budget.

Gr 11 Accounting Term 3, 2020 1

 ACTIVITY 1: ANSWER SHEET

1.1

1.2

1.3

1.4

ACTIVITY 2

You are given the incomplete Cash Budget and Projected Income Statement of Grand Fashions for
the period 1 November 2020 to 31 December 2020.
REQUIRED:
2.1 Complete the Debtors’ Collection Schedule.
2.2 Complete the Cash Budget.
2.3 Complete the Projected Income Statement
2.4 Comment on the debtors’ collection policy and the creditors’ payment period and the effect
this is having on the cash position of the business.
2.5 Should the owner be concerned about the cash position of the business?
Discuss TWO points by referring to two separate figures.
INFORMATION:
A. DEBTORS’ COLLECTION SCHEDULE
Months Credit sales November December
September 200 000 90 000
October 250 000
November
December
Total

B. CASH BUDGET FOR NOVEMBER AND DECEMBER 2020

November December
CASH RECEIPTS
Cash sales 300 000
Cash from debtors
Commission income 2 500 3 500
TOTAL RECEIPTS

Gr 11 Accounting Term 3, 2020 2

 CASH PAYMENTS
Cash purchases of stock 93 750
Payments to creditors 208 000
Wages and salaries
Sundry expenses 50 000 50 000
TOTAL PAYMENTS

SURPLUS (DEFICIT)
Opening bank balance 98 400
Closing bank balance

C. PROJECTED INCOME STATEMENT FOR NOVEMBER AND DECEMBER 2020

November December
Sales 500 000
Cost of sales 312 500
Gross profit 187 500
Other income
Commission income 4 000
Operating expenses
Wages and salaries
Sundry expenses 50 000 50 000
Operating profit
Interest expense
Net profit

D. Additional information:
1. Cash sales amount to 40% of all sales.
2. Debtors are given 30 days to settle their accounts. However, past trends have revealed the following:
▪ 50% pay in 30 days, i.e. the month following the sale, subject to a 10% discount
▪ 45% pay in 60 days, i.e. 2 months after the sale
▪ 5% is written off after 60 days
3. Grand Fashions always works on a fixed mark up on cost and a fixed stock base i.e. stock is
replenished at the end of the month in which the sale took place.
4. 20% of all purchases of stock are bought for cash.
5. All creditors are paid in full in 30 days i.e. the month following the purchase.
6. Wages and salaries for October amounted to R120 000 and will remain the same for the budget period.
7. Depreciation is to be written off equipment at a rate of R1 200 per month.
8. Interest on the loan is capitalised and amounts to R800 per month. Loan repayments together with
interest are made at the end of every second month – the next repayment amounting to R5 600 will be
the 31 December 2020.
9. Commission is received a month after it is earned i.e. commission earned in October will only be
received at the end of November.

Gr 11 Accounting Term 3, 2020 3

 ACTIVITY 2: ANSWER SHEET
2.1 DEBTORS’ COLLECTION SCHEDULE
Month Credit sales November December
September 200 000 90 000
October 250 000
November
December
Total

2.2 GRAND FASHIONSCASH BUDGET FOR NOVEMBER AND DECEMBER 2020

November December
CASH RECEIPTS

Cash sales 300 000

Cash from debtors

Commission income 2 500 3 500

TOTAL RECEIPTS

CASH PAYMENTS

Cash purchases of stock 93 750

Payments to creditors 208 000

Wages and salaries

Sundry expenses 50 000 50 000

Loan

TOTAL PAYMENTS

SURPLUS (DEFICIT)

Opening bank balance 98 400

Closing bank balance

Gr 11 Accounting Term 3, 2020 4

 2.3 PROJECTED INCOME STATEMENT FOR NOVEMBER AND DECEMBER 2020
November December

Sales 500 000

Cost of sales 312 500

Gross profit 187 500

Other income

Commission income 4 000

Operating expenses

Wages and salaries

Sundry expenses 50 000 50 000

Bad debts

Depreciation

Operating profit

Interest expense

Net profit

Comment on the debtors’ collection policy and the creditors’ payment period and the effect this
2.4 is having on the cash position of the business.

2.5 Should the owner be concerned about the cash position of the business? Discuss TWO points
by referring to two separate figures.

Lesson solutions:
https://wcedeportal.co.za/eresource/139761

Gr 11 Accounting Term 3, 2020 5