Question

Hello,

How do you figure out what to enter in the line "payments for purchases" on the cash payments schedule? Is there a formula?

Answer 1

To figure out what to enter in the line "payments for purchases" on the cash payments schedule, first you have to separate the cash purchase and the credit purchase for a particular month. Assume that 30% of purchases of that particular month are paid in cash at the time of the purchase or during the month; therefore the company is expected to make a payment of 30% of purchases in cash during the month.

Payments for purchases are the first item that comes in the cash disbursements budget. Suppose the company plans to pay 30% of its purchases during the month for the items it acquires, then its payments for purchases on the cash payments schedule will be 30% of total purchases of that month.

Cash to be paid for month’s purchases (payments for purchases on the cash payments) = 30% * total purchases during the month