Today we will discuss about how to prepare cash budget under different methods? First method is receipt and payment method.
Receipt and Payment method:
Example: From the following information, prepare 3 months cash budget from April to June. Find out the deficits or surplus.
Months
|
Sales
|
Salary & Wages
|
Material
|
Purchase
|
March
|
1, 70,000
|
19, 000
|
35, 000
|
48, 000
|
April
|
2, 20,000
|
25, 000
|
29, 000
|
62, 000
|
May
|
1, 56,320
|
16,890
|
21, 000
|
32, 200
|
June
|
3, 25,000
|
35, 000
|
26, 000
|
56, 360
|
· 80% of sales were made in credit and 20% in cash.
· 70% of credit sales will be collected in next month and remaining amount collected in second months.
· The repairing expense of a machine is Rs.10, 000 quarterly.
· The opening cash balance in April is Rs.30, 000.
Solution: Cash Budget for 3 months
Particulars
|
April (in Rs.)
|
May (in Rs.)
|
June (in Rs.)
|
Receipts:
| |||
Opening cash balance
|
30, 000
|
----
|
----
|
Sales in cash
|
44, 000
|
31, 264
|
65, 000
|
Collected from debtors
|
95, 200
|
1, 64, 000
|
1, 40, 339
|
Total
|
1, 69, 200
|
1, 95, 264
|
2, 05,339
|
Payments:
| |||
Purchases
|
62,000
|
32, 200
|
56, 360
|
Repair cost
|
10, 000
|
----
|
------
|
Material
|
29, 000
|
21, 000
|
26, 000
|
Salary & Wages
|
25, 000
|
16, 890
|
35, 000
|
Total
|
1, 26, 000
|
70, 090
|
1, 17, 360
|
Surplus
|
43, 200
|
1, 25, 174
|
87, 979
|
Working note:
Collected from debtors
|
April
|
May
|
June
|
Next or first month
|
95, 200
|
1, 23,200
|
87, 539
|
Second month
|
-----
|
40, 800
|
52, 800
|
Total
|
95, 200
|
1, 64, 000
|
1, 40, 339
|
Adjusted Profit & Loss Method:
Example: With the help of following information, prepare cash budget by using adjusted profit & loss method.
Balance Sheet
as on 31 December 2009
Liabilities
|
Amount
|
Assets
|
Amount
|
Share capital
|
80,000
|
Cash
|
8, 800
|
Creditors
|
45, 000
|
Stock
|
30, 000
|
Profit & loss A/c
|
2,000
|
Debtors
|
20, 000
|
Investment
|
69, 000
| ||
1, 27,000
|
1, 27,000
|
Profit & Loss A/c
for the year ending 31 December 2009
Particulars
|
Amount
|
Particulars
|
Amount
|
To administrative
Expense
|
2, 000
|
By gross profit
|
26, 150
|
To salary & wages
|
10, 000
|
By profit on sale of asset
|
1, 250
|
To interest
|
8, 400
| ||
To tax
|
5, 000
| ||
To net profit & loss a/c
|
12, 000
| ||
27, 400
|
27, 400
| ||
To dividend paid
|
5, 600
|
By net profit b/d
|
12, 000
|
To balance c/d
|
8, 400
| ||
12, 000
|
12, 000
|
Other information is:
· On December 31 creditors: Rs.30, 000, debtors: Rs.28, 000, stock : Rs. 10,000, share capital : Rs. 90,000 and Outstanding expense: Rs.10, 000.
Solution:
Cash Budget
For the year ended 2009
Particulars
|
Amount
|
Amount
|
Opening balance
|
8, 800
| |
Add: net profit
|
12, 000
| |
Issue of share capital
|
10, 000
| |
Outstanding expense
|
10,000
| |
Loss on sale of fixed assets
|
1, 250
| |
Decrease in stock
|
20, 000
|
43, 250
|
Total (A)
|
62, 050
| |
Less: Increase in debtors
|
8, 000
| |
Decrease in creditors
|
15, 000
| |
Payment of dividend
|
5, 600
| |
Total (B)
|
28, 600
| |
Closing balance (A-B)
|
33, 450
|
Balance Sheet Method:
Example: With the help of above example prepare cash budget by using balance sheet method and find out cash.
Solution:
Balance Sheet
As on 31 December 2009
Liabilities
|
Amount
|
Assets
|
Amount
|
Share capital
|
90,000
|
Investment
|
69, 000
|
Creditors
|
30, 000
|
Stock
|
10, 000
|
*Profit & loss A/c
|
8, 400
|
Debtors
|
28, 000
|
Outstanding expense
|
10, 000
|
Cash (balancing figure)
|
31, 400
|
1, 38,400
|
1, 38,400
|
*Profit & loss a/c = 12, 000 – 5, 600 = 6, 400
= 6, 400 + 2, 000 = 8, 400
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