Question

D (Pty) Ltd has a sales budget for March of R440.000. About 10% are cash sales and the remainder is sold on account. The company expects that 60% of credit sales will be collected in the month of the sale, 25% in the next month and 10% in the following month. Materials purchased on account are expected to be R250.000. Allan pays 35% in the month of the purchase, 50% in the month following the purchase and the remaining 15% in the second month after the purchase. Salaries and wages of the workers are approximately R45.000 per month. The employees are paid weekly so on average 95% of their wages are paid in the month to which they relate and the remaining 5% is paid in the following month. Utilities average R4.300 per month. Rent on the building is R9.000 per month. Insurance is R3.000 per month and advertising costs are R1,000 per month. February sales were R320.000 and purchases of materials in February were R170 000 January sales were B200.000 and purchases of materials in January were R130,000 The cash balance on March 1st is R5.400 Required: A. Prepare a schedule of cash receipts B. Prepare a schedule of cash payments (Accounts payable payments) C. Prepare a cash budget

Answer 1

A)

SCHEDULE OF CASH RECEIPTS
	MARCH
Cash sales (440000*10%)	44000
Credit sales collections
Jan (200000*90%= 180000*10%)	18000
Feb (320000*90%= 288000*25%)	72000
Mar (440000*90%= 396000*60%)	237600
Total cash receipts	371600

**If 10% of sales are for cash then 100-10%= 90% is on credit

**Credit sales collections = Sales *% of credit sales * % of cash collection in month.

B)

SCHEDULE OF CASH PAYMENTS (ACCOUNTS PAYABLE PAYMENTS)
	MARCH
JAN Purchase [130000*15%]	19500
Feb Purchase [170000*50%]	85000
Mar Purchase [250000*35%]	87500
Total cash payment	192000

C)

CASH BUDGET FOR THE MONTH ENDED MARCH 31
Cash Balance as on 1 March	5400
Cash receipts	371600
Total cash available for disbursement	377000
less:Cash disbursement
Cash payment of purchase	192000
salary and wage expense	45000
Utilities expense	4300
Rent expense	9000
Insurance expense	3000
Advertising expense	1000
Total cash disbursement	(254300)
Cash balance as on March 31	122700