Cash Budget Problems and Solutions

Q.
1) From the following information prepare a cash budget for the months of June and
July
Additional Information:
1. Advance tax of Rs 4,000 payable in June and in December 1994
2. Credit period allowed to debtors is two months
3. Credit period allowed by the vendors or suppliers is one month
4. Delay in the payment of other expenses one month
5. Opening balance of cash on 1st June is estimated as Rs.20,000/-
Sol.-
Q.2) From the estimates of income and expenditure, prepare cash budget for the months
from April to June. (to be solved on 27.11.20)
1. Plant worth Rs. 20,000 purchase in June 25% payable immediately and the
remaining in two equal instalments in the subsequent months
2. Advance payment of tax payable in Jan and April Rs 6,000
3. Period of credit allowed
o By suppliers 2 months
o To customers 1 month
4. Dividend payable Rs.10,000 in the month of June
5. Delay in payment of wages and office expenses 1 month and selling expenses ½
month. Expected cash balance on 1st April is Rs. 40,000.
Sol-
Q.3) From the following information, prepare cash budget for the month of January to
April:( To be discussed)
Expected Sales Expected Purchase
Rs. Rs.
Jan. 60,000 Jan. 48,000
Feb. 40,000 Feb. 80,000
Mar. 45,000 Mar. 81,000
Apr. 40,000 Apr. 90,000

Wages to be paid to workers Rs. 5,000 each month. Balance at the bank on 1st Jan.
Rs.8,000. It has been decided by the Management that:
(i) In case of deficit fund within the limit of Rs.10,000 arrangements can be made with
bank.
(ii) In case of deficit fund exceeding Rs. 10,000 but within the limits of Rs.42,000 issue of
debentures is to be preferred.
(iii) In case of deficit fund exceeding Rs.42,000, issue of shares is preferred (considering
the fact that it is within the limit of authorized capital)
Sol-
Q.4) Prepare Cash Budget of a Company for April, May and June 2019 in a columnar
form using the following information: (to be solved on 27.11.20)
Month Sales Purchase Wage Exp.
Jan. 80,000 45,000 20,000 5,000
Feb. 80,000 40,000 18,000 6,000
March 75,000 42,000 22,000 6,000
April Budget 90,000 50,000 24,000 6,000
May Budget 85,000 45,000 20,000 6,000
June Budget 80,000 35,000 18,000 5,000

You are further informed that:
(a) 10% of purchase and 20% of Sale are for cash
(b) The average collection period (Credit period offered to customers)of the Co. is 1
month and credit purchase is paid off regularly after one month
(c) Wages are paid half monthly and the rent of Rs.500 excluded in expense is paid
monthly
(d) Cash and Bank Balance on April 1, was Rs.15,000 and the company wants to keep it
on end of every month below this figure, the excess cash being put in fixed deposits.
Cash Budget – 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
Q.5) From the following information prepare a monthly cash budget for the three months
ending 31st Dec.2019.
Admin. Selling,
Sales Materials Wages Production
Month etc
(Rs.) (Rs.) (Rs.) (Rs.)
(Rs.)
June 3,000 1,800 650 225 160
July 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

(i) Credit terms are:
(a) Sales — 3 months to debtors. 10% of sales are on cash and balance on credit.
(b) Creditors for material — 2 months.
(ii) Lag in payment:
Wages. 1/4 month, overheads — 1/2 month.

(iii) Cash and Bank Balance on 1st Oct. expected Rs.1,500.
(iv) Other information
(a) Plant and Machinery to be installed in Aug. at a cost of Rs.24,000. It will be paid for
by monthly installments of Rs.5,00 each from 1st Oct.;
(b) Preference share dividend @ 5% on Rs.50,000 are to be paid on 1st Dec.
(c) Calls on 250 equity shares @ Rs.2 per share expected on 1st November;
(d) Dividends from investments amounting to Rs.250 are expected on 31st Dec.;
(e) Income tax (advance) to be paid in December Rs. 500
Solution
Cash Budget
Period: 3 months ending 31 Dec. 2019
Details: Oct. (Rs.) Nov. (Rs.) Dec. (Rs.)
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

5,00.00 5,00.00 5,00.00
500 each
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:
Sale
Month Oct. (Rs.) Nov. (Rs.) December (Rs.)
(Rs.)
June 3,000 1,350.00 – –
July 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

Wages Calculation
1/4 wages of September and 3/4 wages of Oct. Thus,
(1/4 x 750) = 187.50

3/4 x 800 = 600
Total = 787.50
The wages of other months will be calculated on the same pattern.

Cash Budget Problems and Solutions

Uploaded by

Copyright:

Available Formats

Cash Budget Problems and Solutions

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Cash Budget Problems and Solutions

Uploaded by

Copyright:

Available Formats

Q.

Jan. 60,000 Jan. 48,000

Feb. 40,000 Feb. 80,000

Mar. 45,000 Mar. 81,000

Apr. 40,000 Apr. 90,000

Month Sales Purchase Wage Exp.

Jan. 80,000 45,000 20,000 5,000

Feb. 80,000 40,000 18,000 6,000

March 75,000 42,000 22,000 6,000

April Budget 90,000 50,000 24,000 6,000

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

June Budget 80,000 35,000 18,000 5,000

Cash Budget – 2019:

Cash & Bank Balance 15,000 11,700 12,700

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

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

June 3,000 1,800 650 225 160

July 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

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

(ii) Lag in payment:

Wages. 1/4 month, overheads — 1/2 month.

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

Balance b/d 1,500.00 537.50 350.00

Sales 3,212.50 3,462.50 3,712.50

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

Creditors 2,400.00 2,250.00 2,300.00

Wages 787.50 875.00 975.00

Production 300.00 325.00 350.00

Adm. S. & D. 187.50 200.00 212.50

Pref. Dividend – – 2,500.00

Plant and Machinery

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

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

June 3,000 1,350.00 – –

July 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

(1/4 x 750) = 187.50

The wages of other months will be calculated on the same pattern.

You might also like