Cash budget

Particular April May June

Rs Rs Rs

Opening balance 6,000 3,950 3,000

Receipt:-

(1)Cash sales 1,600 1,700 1,800

(2)Collection from debtors* 13,050 13,950 14,850

(3)Advance to be received for

Sale of vehicles ---- ---- 9,000

(4)Dividend from investment ---- ---- 1,000

Total Receipts (A) 20,650 19,600 29,650

Payments:-

(1)Payments of materials [2 month] 9,600 9,000 9,200

(2)Wages** 3,150 3,500 3,900

(3)Overheads *** 1,950 2,100 2,250

(4)Installment of plant and machinery 2,000 2,000 2,000

(5)Dividend on preference share

Capital on 1st June --- --- 10,000

(6)Income tax --- --- 2,000

Total payments (B) 16,700 16,600 29,350

Closing balance (A-B) 3,950 3,000 300

Working note:-

1) Calculation of cash sales *

Given-10% are sold in cash

April=Rs16,000*10/100=Rs1,600

May=17,000*10/100=1,700

June=18,000*10/100=1,800

2) Collection from debtors **

50%of credit sales are collection in the following month.

Remaining 50% of credit sales are collected in next month.

Note:-As cash sales are 10%in each month, the balance 90%is
transferred as credit sales.

Feb:-[14,000*90/100*50/100] =6300
March:-[15,000*90/100*50/100] =6750
April:-[16,000*90/100*50/100] =7200
May:-[17,000*90/100*50/100] =7650
June:-[18,000*90/100*50/100] =8100
For April month collection of credit sales =
{50% of February sales +50% of March sales}
{6,300+6,750}=13,050
For May month collection of credit sales=
{50% of March sales + 50% of April sales}
{6,750+7,200}= 13,950
For June month collection of credit sales =
{50% of April sales + 50% of May sales}
{7,200+7,650}=14,850
3)Wages:-Wages are paid quarterly, this means the first three
quarters are paid in the same month, the last quarters will be paid
in the next month.
Payment in the month of April =1/4 of March+3/4 of April
=3,000*1/4+3,200*3/4
=750+2,400
=3,250
Payment in the month of May =1/4 of April +3/4 of May
=3,200*1/4+3,600*3/4
=800+2,700
=3,500
Payment in the month of June =1/4 of May +3/4 of June
=3,600*1/4+4,000*3/4
=900+3,000
=3,900
Overheads:-Overhead are paid in bi-monthly i.e. half payments in
the same month and reaming half in the next month.
Overheads of the month of April =1/2 of March+1/2 of April.
=1,900*1/2+2,000*1/2
=950+1,000
=1,950.
Overheads of the month of May=1/2 of April+1/2 of May.
=2,000*1/2+2,200*1/2
=1,000+1,100
=2,100.
Overheads of the month of June=1/2 of May+1/2 of June.
=2,200*1/2+2,300*1/2
=1,100+1,150
=2,250.