UNIT IV - CASH BUDGET 1.

. From the particulars given below prepare a Cash Budget for the month of June 2005. A. Expected Sales: April Rs.2,00,000; May Rs.2,20,000; June Rs.1,90,000. Credit allowed to customers is two months and 50% of the sales of every month is on cash basis. B. Estimated Purchases: May Rs.1,20,000; June Rs.1,10,000 40% of the purchase of every month is on cash basis and the balance is payable next month. C. Rs.2,000 is payable as rent every month. D. Time lag in payment of overhead is month. Overhead : for May Rs.12,000; for June Rs.11,000. E. Depreciation for the year is Rs.12,000. F. Interest receivable on investment during June and December Rs.3,000 each. G. Tax payable during April Rs.10,000. H. Estimated cash balance on 1.6.05 is Rs.42,500. 2. X Ltd., wants to arrange overdraft facilities with its bankers during the period April to June 2000 when it will be manufacturing mostly for stock. Prepare a Cash Budget for the above period from the following data, indicating the extent of the bank facilities the company will require at the end of each month: (a) Month Credit Sales Purchases Wages Rs. Rs. Rs. February 1,80,000 1,24,000 12,000 March 1,92,000 1,44,000 14,000 April 1,08,000 2,43,000 11,000 May 1,74,000 2,46,000 10,000 June 1,26,000 2,68,000 15,000 (b) 50% of credit sales are realized in the month following the sales and the remaining 50% in the second month following. (c) Creditors are paid in the month following the month of purchase. (d) Cash at bank on 1.4.2000 (estimated) Rs.25,000. 3. From the following particulars you are required to prepare a cash budget for three months ending 31st December 1999. (a) Months Sales Materials Wages Overheads Rs. Rs. Rs. Rs. August 20,000 10,200 3,800 1,900 September 21,000 10,000 3,800 2,100 October 23,000 9,800 4,000 2,300 November 25,000 10,000 4,200 2,400 December 30,000 10,800 4,500 2,500 (b) Credit terms are: Sales/Debtors 10% sales are on cash basis, 50% of the credit sales are collected next month and the balance in the following month. Creditors: Materials - 2 months, Wages - 1/5 month, Overheads month. (c) Cash balance on 1st October 1999 is expected to be Rs.8,000. (d) A machinery will be installed in August 1999 at a cost of Rs.1,00,000. The monthly installment of Rs.5,000 is payable from October onwards. (e) Dividend at 10% on preference share capital of Rs.3,00,000 will be paid on 1st December 1999. (f) Advance to be received for sale of vehicle Rs.20,000 December 1999. (g) Income-tax (advance) to be paid in December 1999 Rs.5,000. 1

4. Prepare cash budget for the months of April to September 1990 from the information given below: Months March April May June July August September Estimated Sales Rs. 40,000 50,000 30,000 50,000 60,000 70,000 40,000 Estimated Purchases Rs. 40,000 30,000 50,000 60,000 30,000 30,000 20,000 Wages Rs. 7,000 8,000 6,000 5,000 7,000 6,000 8,000

Additional information: (i) Overheads to be incurred each month Rs.3,000. (ii) Period of credit allowed by supplier is one month. (iii) Period of credit allowed to customers is one month. (iv) Estimated sales constitute 50% credit sales. (v) Company is planning to purchase a machinery for Rs.60,000 to be paid in three equal instalments from June onwards. (vi) Cash balance on 1st April 1990 Rs.6,000. (vii) Management policy to meet deficiency of cash stands as: (a) Upto Rs.25,000 loans from banks (b) Exceeding Rs.25,000 with the issue of debentures. 5. Summarised below are the Income and Expenditure forecasts of G Ltd., for the months of March to August, 2,000. Month Sales(all credit) Rs. 60,000 62,000 64,000 58,000 56,000 60,000 Purchases (all credit) Rs. 36,000 38,000 33,000 35,000 39,000 34,000 Wages Rs. 9,000 8,000 10,000 8,500 9,500 8,000 Mnfg. Exps. Rs. 4,000 3,000 4,500 3,500 4,000 3,000 Office Exps. Rs. 2,000 1,500 2,500 2,000 1,000 1,500 Sellig Exps. Rs. 4,000 5,000 4,500 3,500 4,500 4,500

March April May June July August

You are given the following information: (a) Plant costing Rs.16,000 is due for delivery in July payable 10% on delivery and the balance after three months. (b) Advance Tax of Rs.8,000 is payable in March and June each. (c) Period of credit allowed (i) by suppliers 2 months (ii) to customers 1 month. (d) Lag in payment of manufacturing expenses month. (e) Lag in payment of all other expenses 1 month. You are required to prepare a cash budget for three months ending on 1st May 2,000 when there was a cash balance of Rs.8,000. ****************************