Question

 SlippyLtd has been in business for several years. They are in the midst of preparing their quarterly budgets for the first three months starting on 1" January 2019.

 1. Sales for November 2018 and December 2018were $75,000 and $83,000 respectively. Forecast sales for the first three months in 2019 are as follows:

 January 2019   $90,000

 February 2019 $100,000

 March 2019  $120,000

 All sales are on the following terms: 20% on cash basis and remainder is on credit terms. All credit sales are on average are received as follows: 40% is received in the month after the sale is made and the remaining 60% is received two months after the sale.

 2. Goods are bought within the month of sale and costs 45% of the total sales value. Suppliers are paid one month after the goods are received.

 3. Other information are as follows:

 I. Operating expenses of $22,000 per month are payable at each month-end. Included in the operating expenses is an amount of depreciation amounting to $4,000.

 ii. The company intends to purchase a machinery in March for $35,000 and a down payment of S7,400 will be paid immediately. Monthly installment of $2,000 will commence in April 2019.

 iii. Electricity and water charges will be S850 per month is payable on the last day of March, June, September and December.

 iv. Interest of $3,000 per quarter is payable every quarter in advance in the months of February, May, August and November.

 v. Rent of $4,000 per month will be received on the 5th of every month from their tenant vi. The bank balance in their accounting books on 31st December 2018 is expected to be $9,400 (debit balance).

 Required:

 Prepare a monthly cash budget for the period 1st January 2019 to 31st March 2019. Assume that overdraft facilities will be available, if needed.

Answer 1

Slippy Ltd
Cash Budget for the period 1st January to 31st March
	January ($)	February($)	March ($)
Opening Balance	9400	38610	69750
Cash receipts
Receipts from sale	80560	88640	99200
Rent receipts	4000	4000	4000
Total available Cash (A)	93960	131250	172950
Payments
Payment for goods purchased	37350	40500	45000
Operating Expenses	18000	18000	18000
Purchase of machinery	0	0	7400
Electricity & Water charges	0	0	850
Interest payable	0	3000	0
Total Payments (B)	55350	61500	71250
Closing Balance (A-B)	38610	69750	101700
Notes
Calculation of cash receipts
	November ($)		January ($)	February($)	March ($)	Total ($)
Total Sales (A)	75000		90000	100000	120000	310000
Receipts:
Cash Sales (A*20%) (B)	15000	16600	18000	20000	24000	62000
Credit sales (A-B)	60000	66400	72000	80000	96000	248000
40% Received after the month of sale			26560	28800	32000	87360
60% Received after the 2nd month of sale			36000	39840	43200	119040
Total receipts			80560	88640	99200	268400
Calculation of purchase
	December ($)	January ($)	February($)	March ($)	Total ($)
Total Sales (A)	83000	90000	100000	120000	393000
Cost of goods (A*45%)	37350	40500	45000	54000	139500
Payment to suppliers in next month		37350	40500	45000	122850
Depreciation expense is non cash expense hence, shall not be taken into account
Closing balance of previous month will be opening of nect month.