Question

Royal Cigar Company is preparing a budget for cash collections. Its sales for November and December are estimated as $90,000 and $100,000, respectively. Past practice indicates that sales in any given month are collected as follows: month of sale, 75%; month following the month of sale, 20%; uncollectible accounts, 5%. The company allows a 2% discount for cash collections in the month of sale. What is the net cash estimated to be collected in December?

Answer 1

Budgeting:

Budgeting refers to a process that is carried out in the businesses. Budgeting involves various processes which are carried out for the preparations of some of the reports that will reflect the financial position of the business or the entity concerned.

Budgeting is regarded as a managerial process which is conducted for the preparations as well as planning of budgets and also for conducting budgeting control procedures. Budgeting is very important. In process of budgeting future goals are estimated and also comparison is made between the budgeted figures and actual figures to know the deviations and take corrective actions.

Cash receipts Budget:

The cash receipts budget includes cash received from cash sales in the month of sales, bank credit card sales and cash collected for the credit sales.

The schedule indicates the estimated cash receipts from cash sales and cash collections for the credit sales. The schedule of cash receipts includes the collections from accounts receivable that is the estimated cash to be collected in the month of sales and to be collected in the month after the sales.

The estimated cash collected in December is to be computed. The sales will be collected as 75% of credit sales in the month of the sales and collection of 20% of sales in the month following the sales. The discount of 2% is provided by the company on the amount collected in the month of sale.

Prepare schedule showing the estimated cash collection:

The estimated cash collected in December is .

Prepare schedule showing calculation: