AFM-CM-Cash Budget

2020
TRACK - 1: 19MBAFM321: ADV. FINANCIAL MANAGEMENT - III SEMESTER MBA

CASH BUDGET - PROBLEMS
JP.01. The following information relates to a shop. The Owner of the shop has made the
following Sales forecast for First 5 months of the coming year.
Month Sales (Rs.)
January 40,000
February 45,000
March 55,000
April 60,000
May 50,000
Other information are as follows:

1) Debtors & Creditors balance at the beginning of the year are Rs.30,000 and Rs.14,000
respectively. The balances of the other relevant assets and liabilities are:
Cash balance: Rs. 7,500; Stock: Rs. 51,000; Accrued Sales Commission: Rs. 3,500.
2) 40% of the sales are on cash basis. Credit Sales are collected in the month following the
sales.
3) Cost of Goods Sold is 60% of the Sales.
4) The only other variable cost is 5% commission to sales agents. Sales commission is paid in
the month after it is earned i.e. time lag is One month. 80% of sales are subject to
commission.
5) Inventory (Stock) is kept equal to Sales requirements for the next 2 months’ budgeted
sales.
6) Trade Creditors are paid in the month following Purchases.
7) Fixed costs are Rs. 5,000 per month including Rs. 2,000 Depreciation.
You are required to prepare a Cash Budget for each of the First 3 months of the coming year.
JP.02. The following information relating to a company is available:

1) Sales Forecast: (In Rs.)
May 75,000 Sept 300,000
June 75,000 Oct 150,000
July 150,000 Nov 150,000
Aug 225,000 Dec 137,500
Jan 75,000
2) Raw Materials: (In Rs.)
May 37,500 Sept 127,500
June 37,500 Oct 97,500
July 52,500 Nov 67,500
Aug 367,500 Dec 37,500
Dr. Jnaneshwar Pai M, Assistant Professor, Justice K.S. Hegde Institute of Management, Nitte Page 1 of 9
2020
3) Collection estimates:
i) Within the month of Sales 5%;
ii) During the month following Sales 80%;
iii) During the Second month following Sales 15%.
4) Payment for Raw materials: - During the month following in which Purchases take place
5) Miscellaneous Information:
a) General & Administrative Salary: Rs. 11,250 per month;
b) Monthly Lease Payment : Rs. 3,750;
c) Monthly Depreciation charges: Rs. 15,000;
d) Monthly Miscellaneous charges: Rs. 1,150;
e) Income tax of Rs. 26,250 is to be paid in September and December respectively;
f) Payment for Research in October Rs. 75,000;
g) Opening balance of Cash on 1 st July Rs. 55,000;
h) Minimum Cash balance of Rs. 37,500 is to be maintained all throughout the Cash
budget period.
Prepare:
a) A monthly Cash Budget for 6 months: July - December.
b) An estimate of Excess Cash or Shortage of Cash for each month.
JP.03. From the following particulars of a firm prepare a Cash Budget for 6 months: January -
June.
1) Balance Sheet as on 31st December.
Liabilities Assets
Share Capital 10,000 Cash 16,000
Reserves 90, 000 A/c Receivables 10,000
Inventory 20,000
Fixed Assets 59,000
(-) Depreciation 5,000 54,000
100,000 100,000
2) Sales Forecast: (In Rs.)
January 20,000 May 90,000
February 40,000 June 50,000
March 50,000 July 10,000
April 60,000
3) Salary expenses: (In Rs.)
January 3,000 April 9,000
February 5,000 May 11,000
March 7,000 June 6,000
2020
4) Monthly Selling & distribution are expected to be 10% of Sales. Depreciation charges are
1% per month.
5) The firm operates on a 30 day basis, but payments are not received until the next month.
6) All purchases of the firm are in cash only. The firm purchases enough inventories to cover
the following month sales.
7) A minimum Cash balance Rs. 10,000 is maintained.
8) Additional Information: Equipment purchased worth Rs. 5,000 is scheduled for delivery in
March and the Payment is to be made in this connection.
JP.04. From the following particulars of H Ltd, Prepare a Cash Budget for a period of 6
months from July to December. (Rs. In Lakh)
Particulars July August September October November December
Sales (Net of cash 20 30 40 20 20 10
Discount)
Purchases 21 28 14 14 7 7
Wages and Salaries 1.5 2 2.5 1.5 1.5 1
Rent 0.5 0.5 0.5 0.5 0.5 0.5
Other expenses 0.2 0.3 0.4 0.2 0.2 0.1
Taxes - - - 4 - 4
Payment for Plant - - - 10 - -
Construction
All Sales are made terms that allow a Cash discount for a payment within 20 days; If
the discount is not taken full payment is made in 40 days. However the experiences has been
that on 20% of Sales, payment is made during the month in which sales are made; on 70% of
Sales, payment is made during the Second month and balance of 10% of Sales, payment is
made during the Third month.
Materials amount to 70% of Sales and are bought in the month before the firm
expects to sell the finished goods. Its Purchase terms permit it to delay the payment for 1
month.
Assume the firm needs to keep minimum cash balance of Rs. 5 Lakh in hand at all the
times. It is assumed to have an opening cash balance of Rs.6 Lakh on 1st July. Sales for the
month of May and June and January (next year) are 10 each.
Purchases for May and June are 7 and 14 respectively.
JP.05. Following information is available in respect of a firm.

A) Balance Sheet as on 1st August is as follows:
2020
Liabilities Assets
Accrued wages 600 Cash 5,100
Capital 59,200 A/c Receivables 14,700
Other Liabilities 2,000 Inventory at Cost 26,000
Fixed Assets 20,000
(-) Depreciation 4,000 16,000
61,800 61,800
B)
i. Sales are 40% against cash and 60% on credit.
ii. Of the Credit sales, 75% are collected in the 1st month following sales and 25% in the
2nd month following sales.
iii. All Inventory purchases are paid in the month in which they are purchased.
iv. The basic inventory of Rs. 10,000 at cost is constantly maintained and the firm follows
the policy of purchasing enough additional Inventory each month to cover 1.25 times
of the next months sales. Its Gross profit margin is 20% on Sales.
v. A minimum Cash balance of Rs. 2,000 is to be maintained by the firm.
vi. Accrued wages and other Current Liabilities remain unchanged.
C) Past Sales for the month June - July were Rs. 18,000 and Rs. 20,000 respectively.
D) The budgeted sales are as follows:
August 20,000 December 50,000
September 26,000 January 18,000
October 24,000 February 16,000
November 40,000
E) Monthly expenses are:-
i. Wages and Salaries:
August 1,400 November 2,000
September 1,600 December 3,000
October 1,600 January 1,400
ii. Rent - Rs. 400 per month;
iii. Depreciation - Rs. 150 per month;
iv. Other expenses - 1% of Sales;
You are required to prepare a Cash Budget for 6 months from August - January.
2020
JP.06. Following Quarterly results are expected in case of XYZ Limited for the next year (in
Rs.1,000)
Particulars I II III IV
Sales 7,500 10,500 18,000 10,500
Cash Payments:
1. Production Cost 7,000 10,000 8,000 8,500
2. Selling, Admin. And Other Cost 1,000 2,000 2,900 1,600
3. Purchase of Plant and other 100 1,100 2,100 2,100
Fixed assets
Debtors at the end of a Quarter are 1/3rd of Sales for the Quarter.
The Opening balance of Debtors is Rs.3,000,000. Cash in hand at the beginning of the year is
Rs. 650,000 and the desired minimum balance is Rs. 500,000. Borrowing is made in multiples
of 10,000. Interest charges may be ignored.
You are required to prepare:
1) A Quarter-wise Cash Budget for the year;
2) The Amount of loan outstanding at the end of the year.
JP.07. The Accountant of a company is preparing the Cash Budget of the company for the
first 6 months of the year and he obtains the following information:
Sales on Credit, Variable Cost and wages are budgeted as follows: (November and December
of the previous year being the actual figures for those months)
Month Credit Sales Variable Cost Wages
November 10,000 7,000 1,000
December 12,000 7,500 1,100
January 14,000 8,000 1,200
February 13,000 7,700 1,100
March 10,000 7,000 1,000
April 12,000 7,500 1,100
May 13,000 7,750 1,200
June 16,000 8,750 1,300
1) Fixed expenses amount to Rs. 1,500 per month and (½) Half year’s Preference dividend Rs.
1,400 is due on June 30th, Corporate tax amounting to Rs. 8,000 is payable in January and
Progress payments under a Building contract are due as follows:
31st March - Rs. 5,000 31st May - Rs. 6,000.
2) The terms on which goods are sold are Net Cash in the month following delivery.
3) Variable costs are payable in the month following that in which they are incurred and are
50% subject to 2.5% discount and the balance net. It is found that 75% of the debtors (Do not
2020
pay until the following) to whom Sales are made pay within the period of credit and rest do
not pay until the following month.
Show the Total cash receipts and Total cash payments month-wise for each of the 6 months.
JP.08. Given below the summarized income and expenses Forecast for the month: March -
August 2010.
Month Sales Purchases Wages Manufacturing Office Selling
expenses expenses expenses
March 60,000 36,000 9,000 4,000 2,000 4,000
April 62,000 38,000 8,000 3,000 1,500 5,000
May 64,000 33,000 10,000 4,500 2,500 4,500
June 58,000 35,000 8,500 3,500 2,000 3,500
July 56,000 39,000 5,900 4,000 1,000 4,500
August 60,000 34,000 8,000 3,000 1,500 4,500
You are given the following additional information:

1) Plant costing Rs. 16,000 is due for delivery in July; Payable 10% on delivery and balance
after 3 months.
2) Advance tax of Rs. 8,000 is payable in March and June.
3) Period of Credit allowed by Supplier: 2 months and to customer: 1 month.
4) Lag in payment of manufacturing expenses - ½ a month.
5) Lag in Payment of all other expenses - 1 month.
You are required to prepare a Cash Budget for 3 months starting on 1st May 2010 when there
was a Cash balance of Rs. 8,000.
JP.09. Prepare a Cash Budget for M/s. Alpha Manufacturing Company on the basis of the
following information for the first 6 months of 2020.
1) Cost and Price remain Unchanged.
2) Cash Sales are 25% of Total sales. 75% are Credit Sales.
3) 60% of Credit sales are collected in the month after sales; 30% in the Second month and
10% in the Third. No Bad debts are expected.
4) Sales forecast are as follows: (In Rs.)
Oct 2019 1,200,000 Mar 2020 800,000
Nov 2019 1,400,000 Apr 2020 1,200,000
Dec 2019 1,600,000 May 2020 1,000,000
Jan 2020 6,00,000 June 2020 800,000
Feb 2020 8,00,000 July 2020 1,000,000
Gross Profit margin 20%.
2020
5) Anticipated Purchases are: (In Rs.)

February 640,000 May 640,000
March 960,000 June 960,000
6) Wages and Salaries to be paid as follows: (In Rs.)
February 160,000 May 160,000
March 200,000 June 140,000
7) Interest on Rs. 2,000,000 @ 6% on Debenture is due by the end of March and June. (3
months for 2 Quarter, 4 times in a year).
8) Excise deposit due in April Rs. 200,000.
9) Capital expenditure on Plant and Machinery planned for June Rs. 120,000.
10) Company has a Cash balance of Rs. 400,000 on 31-12-2019.
11) Rent is Rs. 8,000 per month.
12) The Company borrows sufficient funds to maintain the minimum balance of Rs. 400,000
on monthly basis.
JP.10. A company produces particular brand of product which sells in the market for Rs.75.
The cost information for the product are as follows:
A) Variable Manufacturing cost are Rs. 35 per unit.
B) Variable Selling and Administrative expenses are Rs. 5 per unit.
C) Fixed manufacturing cost requiring cash are Rs. 250,000 per month.
D) Fixed Selling and Administrative expenses are Rs. 200,000 per month all requiring cash.
Depreciation is Rs. 60,000 per month.
The other relevant information are:
E) The firm has a policy of maintaining a 2 month supply of finished goods. The Opening
Inventory on January 1 st is 42,000 units.
F) The firm does not hold raw material Inventory of purchases Raw materials as and when
required. The cost of Raw material is included in variable manufacturing cost of Rs. 35.
G) The firm has a practice of making all sales on credit; collecting 30% in the month of Sales
and the balance in the following month. There are No bad debts and over-due accounts. The
beginning Debtors balance is Rs. 700,000.
H) The firm pays all manufacturing costs in the month of production.
I) The firm pays 4/5 of Selling and administrative expenses in the month of Sales and the
balance 1/5 is paid in the following month. On January 1st the firm owed Rs. 30,000 for
December expenses. The minimum desired Cash balance is Rs. 80,000 which is also the
amount the firm has on January 1st.
2020
Borrowings are possible and can be made in multiples of Rs. 10,000

The sales budget for first 6 months in units is:
February 26,000 May 30,000
March 30,000 June 28,000
You are required to prepare a cash budget for the first 3 months of the coming year.
JP.11. Delta Limited is manufacturing a product which is sold at Rs. 50 each. The Cost data
are:
Variable Manufacturing cost is Rs. 25 per unit
Variable Selling & Administrative expenses is Rs. 5 per unit
Fixed Manufacturing cost paid in each month Rs. 150,000
A fixed Selling & Administrative expense is Rs. 100,000 payable in cash each month. The
Company has a policy of holding at the end of each month an Inventory of finished goods
representing the targeted Production for next 2 months. Opening Inventory on 1 st January
was 30,000 units
The Raw materials required each month is purchased in cash which is included in the Variable
manufacturing cost of Rs. 25 per unit. No Inventory of Raw materials is held. All Sales are on
Credit. Collection is 50% in the same month and balance in month following sale. Opening
Debtors balance was Rs. 400,000 on 1st January. All manufacturing costs are paid in cash in
the month of Production. 80% of Selling & Administrative expenses are paid in the month of
Sales and the balance in the following month. The Minimum desired cash balance is Rs.
50,000 which is also balance held of 1st January. The Company borrows at the beginning of
the month and repays when the cash balance is in excess of Rs. 50,000. The Estimated sales
(in Units) for the next 6 months are:
January 15,000 February 20,000 March 25,000
April 27,000 May 30,000 June 30,000
Prepare Cash Budget for months from January to June.
JP.12. Prepare a Cash Budget from January to June from the following information.
The estimated Sales and expenses are as follows:
Particulars Nov Dec Jan Feb March Apr May June
Sales (Rs.) 200,000 220,000 120,000 100,000 150,000 240000 200000 200000
Wages & 30,000 30,000 24,000 24,000 24,000 30,000 27,000 27,000
Salary (Rs.)
Miscellaneous 27,000 27,000 21,000 30,000 24,000 27,000 27,000 27,000
expenses (Rs.)
2020
Additional Information:
1) 20% of Sales are on cash and the balance on Credit.
2) The firm has a Gross Profit margin of 25% on Sales.
3) 50% of Credit Sales are collected in the month following sales, 30% in the Second month
and 20% in the Third month.
4) Materials for the Sales of the each month is purchased one month in advance on a credit
for 2 months.
5) The time lag in the Payment of Wages and Salaries is 1/3 of a month and of miscellaneous
expenses: 1 month.
6) Debentures worth Rs. 40,000 will be sold in January.
7) The firm maintains a Minimum cash balance of Rs. 40,000. Funds can be borrowed at the
rate of 12% p.a in the multiples of Rs. 1,000, the interest being payable on monthly basis.
8) Cash balance at the end of December is Rs. 60,000.
Developed by:
Dr. Jnaneshwar Pai Maroor
Assistant Professor & PGP Coordinator,
Justice K.S. Hegde Institute of Management,
NMAMIT Campus, Nitte - 574 110.

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2020

TRACK - 1: 19MBAFM321: ADV. FINANCIAL MANAGEMENT - III SEMESTER MBA

Other information are as follows:

JP.02. The following information relating to a company is available:

JP.05. Following information is available in respect of a firm.

You are given the following additional information:

5) Anticipated Purchases are: (In Rs.)

Borrowings are possible and can be made in multiples of Rs. 10,000

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