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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:
| 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
| 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:
| 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
| 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
© Webmaster Duncan Williamson 2001