Cash Budget Format and its Explanation with Solved Example:

Cash Budget
For the period ending………..
The directors of Kingston & Co. were concerned about the the company’s cash flow. They
requested their accountant to prepare a cash budget for the four months ending 30 April 2016.

(i) The following sales figures are for the months of November 2015 to June 2016. The figures
from January 2016 onward are estimated:

Half the sales are normally paid for in the month in which they occur and the customers are
rewarded with a 5% cash discount. The remaining sales are paid for net in the month following
the sale.

(ii) Goods are sold at a mark-up of 25% on the goods purchased one month before sale. Half of
the purchases are paid for in the month of purchase and a 4% prompt settlement discount is
received. The remainder is paid in full in the following month.

(iii) Wages of $12000 per month are paid in the month in which they are earned. It is expected
that the wages will be increased by 10% from 1 March 2016.

(iv) Rent will cost $60000 per annum payable three monthly in advance in January, April, July
and December each year.

(v) The directors have arranged a bank loan of $60000 which would be credited to
company’s current account in February 2016.

(vi) The half-yearly interest on 200000, 8% debentures of $1 each is due to be paid on 15

January 2016.

(vii) The ordinary dividend of $12000 for the year 2015 will be paid in March 2016.

(viii) The bank balance at 31 December 2015 is $12000.

Required:
Prepare a cash budget for the four months ended 30 April 2016. Give your answers to the
nearest dollar ($).
Solution:
Cash Budget
For the four months ending 30 April 2016