7th sem, wcm, cash budget practice question solution

Cash Budget Analysis

Preparing cash budget for six months from January to June 2024

Problem Statement

From the following information and the assumption that the cash balance in hand on January 1, 2024 is Rs 72,500, prepare cash budget for six months from January to June.

Initial Cash Balance: Rs 72,500

Cash Sales: 50% of total sales

Debtors Credit: 1 month

Creditors Credit: 1 month

Cash Budget (January - June 2024)

Particulars	January	February	March	April	May	June
Cash Receipts
Cash Sales (50%)	36,000	48,500	43,000	44,300	51,250	54,350
Collection from Debtors	0	36,000	48,500	43,000	44,300	51,250
Bank Loan	0	0	0	0	30,000	0
Total Cash Receipt (A)	36,000	84,500	91,500	87,300	125,550	105,600
Cash Payments
Purchases (1 month credit)	0	25,000	31,000	25,500	30,600	37,000
Wages	10,000	12,100	10,600	25,000	22,000	23,000
Production Overheads (1 month credit)	0	6,000	6,300	6,000	6,500	8,000
Other Operating Expenses (1 month credit)	0	5,500	6,700	7,500	8,900	11,000
Sales Commission (3% of sales)	2,160	2,910	2,580	2,658	3,075	3,261
Asset Acquisitions	0	8,000	0	25,000	0	0
Dividend Payment	0	0	0	0	0	35,000
Total Cash Payment (B)	12,160	59,510	57,180	91,658	71,075	117,261
Surplus/(Deficit) (A - B)	23,840	24,990	34,320	(4,358)	54,475	(11,661)
Add: Beginning Balance	72,500	96,340	121,330	155,650	151,292	205,767
Ending Balance	96,340	121,330	155,650	151,292	205,767	194,106

Notes:

• Cash sales are calculated as 50% of total sales for each month
• Collection from debtors assumes 1 month credit period
• Payments for purchases, production overheads, and other operating expenses are made after 1 month credit period
• Sales commission is calculated as 3% of total sales for each month
• Asset acquisitions are made in February (Rs 8,000) and April (Rs 25,000)
• Bank loan of Rs 30,000 is received in May
• Dividend of Rs 35,000 is paid in June

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