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- 10 Marks
Question
b) The budgeted Income Statement for Zeedan Company for the year 2020 is presented below.
| Description | GH¢ |
|---|---|
| Sales revenue | 930,000 |
| Cost of sales | 558,000 |
| Gross profit | 372,000 |
| Total expenses | 225,000 |
| Net profit | 147,000 |
Notes:
i) Monthly sales in each quarter are the same. The sales for January are GH¢50,000 and this will remain unchanged up to March when it will increase by GH¢20,000 from April and remain unchanged for the remaining two months in the quarter. Third quarter monthly sales will be GH¢90,000 each while those of the fourth quarter are GH¢100,000 each.
ii) 20% of all sales are on a cash basis, 40% of the monthly sales are paid in the month after sales, and the balance is paid the second month after sales. No bad debt is expected.
iii) The monthly cost of sales represents 60% of the current month’s sales. Inventory is kept at 60% of the following month’s cost of sales. All purchases are paid in full after one month.
iv) Included in the expenses is a depreciation of GH¢87,000. The monthly expenses paid as and when incurred are GH¢10,000. This is fixed in January but increased by 20% effective April.
Required:
Extract the Cash Budget for the second quarter of the year, showing the cash balance for each month in the quarter.
(10 marks)
Answer
Cash Budget for the Second Quarter
| Description | April (GH¢) | May (GH¢) | June (GH¢) |
|---|---|---|---|
| Receipts | |||
| Cash Sales | 14,000 | 14,000 | 14,000 |
| Debtors | 40,000 | 48,000 | 56,000 |
| Total Receipts | 54,000 | 62,000 | 70,000 |
| Payments | | | |
| Purchases | 37,200 | 42,000 | 42,000 |
| Expenses | 12,000 | 12,000 | 12,000 |
| Total Payments| 49,200 | 54,000 | 54,000 |
| Net Cash Flow (NCF) | 4,800 | 8,000 | 16,000 |
| Bal b/d | 2,000 | 6,800 | 14,800 |
| Bal c/d | 6,800 | 14,800 | 30,800 |
Debtors Collection Schedule
| Sales (GH¢) | Jan | Feb | March | April | May | June | July |
|---|---|---|---|---|---|---|---|
| Cash Sales | 10,000 | 10,000 | 10,000 | 14,000 | 14,000 | 14,000 | 18,000 |
| Debtors | |||||||
| Jan bal | 20,000 | ||||||
| Feb | 20,000 | ||||||
| March | 20,000 | ||||||
| April | 28,000 | ||||||
| May | 28,000 | ||||||
| Total Receipts | 54,000 | 62,000 | 70,000 |
Creditors Payment Schedule
| Description | March (GH¢) | April (GH¢) | May (GH¢) | June (GH¢) | July (GH¢) |
|---|---|---|---|---|---|
| Cost of Sales 60% | 30,000 | 42,000 | 42,000 | 42,000 | 54,000 |
| Add: Closing Stock | 25,200 | 25,200 | 25,200 | 32,400 | |
| Total | 55,200 | 67,200 | 67,200 | 74,400 | |
| Less: Opening Stock | 18,000 | 25,200 | 25,200 | 25,200 | |
| Purchases | 37,200 | 42,000 | 42,000 | 49,200 | |
| Payment | 37,200 | 42,000 | 42,000 | 49,200 |
Monthly Expenses Schedule
| Description | GH¢ |
|---|---|
| Total | 225,000 |
| Less: Depreciation | 87,000 |
| Net Total | 138,000 |
| 1st Quarter (10,000 × 3) | 30,000 |
| Remaining | 108,000 |
| Monthly Expenses (108,000 ÷ 9) | 12,000 |
(10 marks)
- Tags: Budgeting, Cash Budget, Payments, Receipts
- Level: Level 2
- Topic: Cash Budgets and Master Budgets
- Series: NOV 2021
- Uploader: Dotse