Go to the Cash Budget Page

Cash Budgets Page 2: Solution and Question

The Cash Budget Solution Pictures

Here's a question that is remarkably like the exercise you've just worked through on Cash Budgets Page 1. Do your best and use the forms and pictures from page 1 to help you.

The opening balance of cash is to be 5,000 (that's the balance b/d for Month 1).

For this business, the sales plans and debtors details are as follows:

Credit Sales
Month 1 Month 2 Month 3
42,000 22,000 36,000
Month 4 Month 5 Month 6
45,500 38,000 44,000

The business has three classes of debtor: Debtors 1, 2 and 3 and they pay their debts according to this table

Payment History of Debtors
Which Debtors When They Pay How Many of
Them Pay at This Time
Debtors 1 within the month of sale 60%
Debtors 2 in the month after sale 30%
Debtors 3 in the second month after sale 10%

For this business, the purchase plans and creditors details are as follows:

Payment History for Creditors
Month 1 Month 2 Month 3
29,000 26,750 38,500
Month 4 Month 5 Month 6
22,000 20,000 31,000

The business has three classes of creditor: Creditors 1, 2 and 3 and we pay our debts according to this table

Payment History for Creditors
Which Creditors When We Pay How We
Pay at This Time
Creditors 1 within the month of sale 75%
Creditors 2 in the month after sale 20%
Creditors 3 in the second month after sale 5%

 

Final words from me are that the balance c/d of the cash budget at the end of Month 3 is 5,113; the Total Receipts from Debtors for Month 6 is 42,350; and the Total Payments to Creditors for Month 6 is 28,350.

 

Duncan Williamson
14 October 2001 Revised 15 October 2001

Write to me at any time



 
Webmaster Duncan Williamson 2001