1.

A company is expecting to have AED 25000 cash in hand on 1st April 2016 and it requires you to
prepare an estimate of cash position during the three month, April to June 2016. The following
information is supplied to you.

Months Sales(AED) Purchase(AED) Wages(AED) Expenses(AED)

March 70,000 40,000 8,000 6,000
April 92,000 52,000 9,000 7,000
May 100,000 60,000 10,000 8,000
June 120,000 55,000 12,000 9,000
Other information:
1. Period of credit allowed by suppliers – one month
2. 25% of sale is for cash and the period of credit allowed to customers for credit sale is one month.
3. Delay in payment of wages and expenses – one month.
4. Income tax of AED 25,000 is to be paid in June 2016.

CASH BUDGET
APRIL MAY JUNE
Receipts: 25,000 46,500 72,500
Cash Sales 23,000 25,000 30,000
Collection from Debtors 52,500 69,000 75,000
Total Receipts 100,500 140,500 177,500
Payments:
Payment to Creditors 40,000 52,000 60,000
Payment of Wages 8,000 9,000 10,000
Payment of Expenses 6,000 7,000 8,000
Income Tax --- -- 25,000
Total Payments 54,000 68,000 103,000
Closing cash balance 46,500 72,500 74,500

2. San Jos Co. wishes to approach the bankers for temporary overdraft facility for the period from October
2016 to December 2016. During the period of these three months, the firm will be manufacturing mostly
for stock. You are required to prepare a cash budget for the above period.
Month Sales ($) Purchases ($) Wages ($)
August 460,000 449,600 34,000
September 484,000 288,000 25,000
October 316,000 686,000 18,000
 November 548,000 392,000 20,000
December 352,000 436,000 20,000
(a) All sales are on credit. 50% of credit sales are realized in the month following the sales and
remaining 50% in the second following.
(b) Creditors are paid in the month following the month of purchase
(c) Estimated cash as on 1‐10‐2016 is $35,000.

3. From the following information, prepare cash budget of a business firm for the months of April and May.
(a) The firm makes 20 per cent cash sales. Credit sales are collected 40, 30 and 25 per cent in the month
of sales, month after and second month after sales, respectively. The remaining 5 per cent becomes bad
debts.
(b) The firm is entitled to 2 per cent discount on all its purchases if bills are paid within 15 days and the
firm avails of all such discounts. Monthly purchases are made in two equal lots on fortnightly basis.
(c) Expenses are paid at a ratio of 30:70 in the same month and the following respectively.
(e) Other data is:

Month Sales Purchases Expenses

Jan 100,00 80,000 30,000
0
Feb 120,00 70,000 25,000
0
March 150,00 100,000 30,000
0
April (Budgeted) 170,00 120,000 20,000
0
May (Budgeted) 140,00 110,000 20,000
0

Solution:
 CASH BUDGET FOR THE MONTHS OF APRIL & MAY
Receipts: April May
Opening cash balance ---- 3,800
Cash Sales 34,000 28,000
Collection from debtors (April:54,400+36,000+24,000 and for 114,400 115,600
May: 44,800+40,800+30,000)
Total Receipts 148,400 147,400
Payments:
Payments to Creditors 117,600 107,800
Expenses (April:6,000+21,000 = 27,000 and for May: 27,000 20,000
6,000+14,000 = 20,000)
Total Payments 144,600 127,800
Closing Cash Balance 3,800 19,600