The accountant for ABX Limited compiled the following cost information regarding the budgetary period of four moths. Sales in Kgs are expected to be 2000 per month for Jan, Feb, Mar and April. The selling price of K10 per Kg will remain uniform throughout the four months. The company is expected to have cash at hand of K15,000 at the beginning of the period. ABX Limited is expecting a particular debtor to settle his outstanding amount in January for K12,000. The possibility of collecting this amount is 100%. The accountant has also noted the following: The company will hire a grader for the first two months at K2000 per month. Prepared electricity will be paid only in Mar and April at K3000 for each month. Wages and salaries are expected to be K3500 on a monthly basis. Stationery is budgeted at K1,500 in month one and K2500 in month 2 and 3. Transport and fuel is expected to be K2500 per month for the entire period Repairs and maintenance for the build will only be paid at K3000 in the first month. Required: Prepare the cash budget for ABX Limited for the periods of Jan, Feb, Mar and Apr. Discuss problems associated with preparing cash budgets.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Question 2
- The accountant for ABX Limited compiled the following cost information regarding the budgetary period of four moths.
Sales in Kgs are expected to be 2000 per month for Jan, Feb, Mar and April.
The selling price of K10 per Kg will remain uniform throughout the four months.
The company is expected to have cash at hand of K15,000 at the beginning of the period.
ABX Limited is expecting a particular debtor to settle his outstanding amount in January for K12,000. The possibility of collecting this amount is 100%.
The accountant has also noted the following:
- The company will hire a grader for the first two months at K2000 per month.
- Prepared electricity will be paid only in Mar and April at K3000 for each month.
- Wages and salaries are expected to be K3500 on a monthly basis.
- Stationery is budgeted at K1,500 in month one and K2500 in month 2 and 3.
- Transport and fuel is expected to be K2500 per month for the entire period
- Repairs and maintenance for the build will only be paid at K3000 in the first month.
Required:
Prepare the
Discuss problems associated with preparing cash budgets.
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