Individuals generally do not prepare statements of cash flows concerning their personal activities. But they do engage in cash budgeting—if not on paper, then at least in their heads.
Assume, for example, it is December 29—a Monday. In two days your rent for January. $200. will be due. You now have $140 in the bank: every Friday you receive a paycheck for $100. You probably see the problem. And it probably doesn’t look too serious: you can find a way to deal with it. That’s what budgeting is all about.
Let’s take this example a step further. In addition to the facts giver, above, your weekly cash payments include meals, $30: entertainment, $20: and gasoline. $10.
Instructions
a. Using the following cash budget, compute your cash balance at the end of weeks 2, 3, and 4.
| Week | |||
| 1 | 2 | 3 | 4 |
Beginning cash balance | $140 | $(20) | $? | $? |
Expected cash receipts | 100 | 100 | 100 | 100 |
Less: Expected cash outlays: |
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|
|
|
Monthly rent | (200) |
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|
|
Meals | (30) |
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Entertainment | (20) |
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Gasoline | (10) |
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|
Ending cash balance | $(20) | $? | $? | $? |
b. Evaluate your financial situation.
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