The Amber Magick Shoppe has forecast its sales revenues and purchases for the last 5 months of 200x to be as follows: Sales Purchases August RM22,000 RM17,000 September 15,000 19,500 October 25,000 29,000 November 30,000 20,000 December 26,000 24,000 60% of sales are on credit. On the basis of past experience, 50% of the accounts receivable are collected the month after the sale and the remainder are collected 2 months after the sale. Purchases are paid 30 days after they are incurred. The firm has a cash balance of RM5,000 on hand as of October 31, and its minimum required cash balance is RM4,000. Required : Prepare a schedule of cash receipts for October, November and December. Prepare a cash budget for the same period.
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.
The Amber Magick Shoppe has
|
|
Sales |
Purchases |
|
August |
RM22,000 |
RM17,000 |
|
September |
15,000 |
19,500 |
|
October |
25,000 |
29,000 |
|
November |
30,000 |
20,000 |
|
December |
26,000 |
24,000 |
60% of sales are on credit. On the basis of past experience, 50% of the accounts receivable are collected the month after the sale and the remainder are collected 2 months after the sale. Purchases are paid 30 days after they are incurred. The firm has a cash balance of RM5,000 on hand as of October 31, and its minimum required cash balance is RM4,000.
Required :
- Prepare a schedule of cash receipts for October, November and December.
- Prepare a
cash budget for the same period.
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