Published On:Monday, 19 December 2011
Posted by Muhammad Atif Saeed
Cash Budget with Solved Example
In cash budget, first of all, we estimates our all incomes like cash from sales, cash from interest, dividends and other receipts. After this, we estimates our all expenses. If our cash receipts are less than total cash payment, we may take decision to get cash through loan.
Today, we will focus on one cash budget example because we think, examples might be simplified to improve reading and basic understanding of any topic of accounting.
Example . From the following forecasts of income and expenditure, prepare a cash budget for the months Jan. to April 2011.
Today, we will focus on one cash budget example because we think, examples might be simplified to improve reading and basic understanding of any topic of accounting.
Example . From the following forecasts of income and expenditure, prepare a cash budget for the months Jan. to April 2011.
| Months | Sales (Credit) | Purchase (Credit) | Wages | Manufacturing expenses | Administrative expenses | Selling expenses |
| 2010 Nov. | 30000 | 15000 | 3000 | 1150 | 1060 | 500 |
| Dec. | 35000 | 20000 | 3200 | 1225 | 1040 | 550 |
| 2011 Jan. | 25000 | 15000 | 2500 | 990 | 1100 | 600 |
| Feb. | 30000 | 20000 | 3000 | 1050 | 1150 | 620 |
| March | 35000 | 22500 | 2400 | 1100 | 1220 | 570 |
| April | 40000 | 25000 | 2600 | 1200 | 1180 | 710 |
Additional information in follows :
1. The customers are allowed a credit period of two months.
2. A dividend of $ 10000 in payable April.
3. Capital expenditure which has to be incurred : 15th Jan. $ 5000, we will buy a plant and in march, we will buy a building on loan and its payment will be done with in monthly installments of $ 2000 each.
4. The creditor are allowing a credit of 2 months.
5. Wages are paid on the 1st of the next months.
6. Lag in payment of other expenses is one month.
7. Balance of cash in hand on 1st Jan. 2011 is $ 15000.
This cash budget example shows how cash inflows and outflows are tracked monthly to ensure the business has enough cash to cover its expenses. The ending cash balance for each month provides insight into the company’s liquidity and financial health. By maintaining a positive cash flow, the business can operate smoothly and meet its financial obligations. Best Cash Flow Forecasting Software | Financial Forecasting Strategy