From the estimates of income and expenditure, prepare cash budget for the months from April to June.
Plant worth 20,000 purchase in June 25% payable immediately and the remaining in two equal instalments in the subsequent months
Advance payment of tax payable in Jan. and April 6,000
- Period of credit allowed:
- By suppliers 2 months
- To customers 1 month
Dividend payable 10,000 in the month of June.
Delay in payment of wages and office expenses 1 month and selling expenses ½ month. Expected cash balance on 1st April is 40,000.
Solution:
Plant worth 20,000 purchased, payable immediately is 25% i.e. 5,000 should be paid in the month of June. The remaining cost of the machine has to be paid in the subsequent months, after June. The payments whatever are expected to make after June is not relevant as far as the budget preparation concerned.
- Delay in the payment of wages and office expenses is only one month. It means wages and office expenses of Feb. month are paid in the next month, March.
Selling expenses from the above coloured boxes, it is obviously understood that during the months of April, May and June; the following will be stream of payment of selling expenses.
3. Selling expenses is having the delay of ½ month, which means 50% of the selling expenses is paid only in the current month and the remaining 50% is paid in the next
Every month 50% of the selling expenses of the current month and 50% of the previous month selling expenses are paid together; the above coloured boxes depict the payment of 50% of the current selling expenses along with 50% expenses of previous month.
