Question

Question 6 (Marks: 17) DJ Zinhle, South Africa's number 1 female DJ has ventured into retail and has launched a furniture shop called Jiyane Artilier. The following table contains the projected sales of Jiyane Artilier for January 2020 to March 2020 2020 Projected Sales January February March Sales R50,000 R53,000 R56,000

Answer 1

6.1.1 Schedule of cash receipts from customers for the months January to March 2020 Jiyane Artilier Schedule of Cash receipts For January to March 2020 January February March Sales R50,000 R53,000 R56,000 Cash receipts from: 50% of sales collected in the month of sale R25,000 R26,500 R28,000 (Sales *50%) 25% of sales are collected in the month following the sale R16,250 R12,500 R13,250 (previous month sales * 25%) 20% of sales are collected two months following the sale R11,000 R13,000 R10,000 (2nd previous month sales * 20%) Total cash receipts R52,250 R52,000 R51,250 6.1.2 Schedule of cash payments for purchases for the months January to March 2020 Jiyane Artilier Schedule of Cash payments For January to March 2020 January February March Sales R50,000 R53,000 R56,000 Purchases R39,000 R30,000 R31,800 (60% * previous month sales) Cash payments for purchases: 50% of purchases paid in the month of purchase R19,500 R15,000 R15,900 (purchases * 50%) 50% of purchases paid in the following month R16,500 R19,500 R15,000 (previous month purchases * 50%) Total cash payments R36,000 R34,500 R30,900 Purchases of December = Sales of November *60% = R55,000 * 60% = R33,000

6.1.3 Cash budget for the months January to March 2020 Jiyane Artilier Cash Budget For January to March 2020 January February March R10,000 R19,750 R15,600 RO R5,000 RO R52,250 R52,000 R51,250 R62,250 R76,750 R66,850 Beginning cash balance Scrap value proceeds of the old equipment Cash receipts from customers Total cash available Cash payments for: Purchases Purchase of new equipment Selling and administrative expenses(wages) Selling and administrative expenses(variable) R36,000 R34,500 R30,900 RO R20,000 RO R4,000 R4,000 R4,000 R2,500 R2,650 R2,800 (5% *Sales) Total cash payments Preliminary cash balance Additional loan Ending cash balance R42,500 R61,150 R37,700 R19,750 R15,600 R29,150 RO RO ROL R19,750 R15,600 R29,150 6.1.4 Three purposes for preparing a budget are - 1 Budget is prepared for planning the different phases of business operations and gives direction to the organization in which it is supposed to work. 2 Budget is used to judge the employee performance and to control financial performance of the company 3 Budget is also useful in predicting cash flows of the company