4.2 Comment on the cash budget and provide recommendations, where applicable. (8
ID: 2331986 • Letter: 4
Question
4.2
Comment on the cash budget and provide recommendations, where applicable.
(8)
4.3
On 31 March 2018, the actual receipts and payments indicated the following for three items on the cash budget:
Rent income
R3 000
Advertising
R1 000
Telephone
R2 900
Comment on your observations and provide ONE (1) point of advice in each case.
CASH BUDGET FOR THE THREE MONTHS ENDED 31 MARCH 2018 JANUARY (R)
FEBRUARY (R)
MARCH (R)
RECEIPTS
428 200
534 600
215 000
Cash sales
A
83 600
76 000
Collection from debtors
180 000
144 000
132 000
Rent income
7 000
7 000
7 000
Loan from XYZ Bank
?
-
-
Ordinary share capital
-
300 000
-
PAYMENTS
304 200
288 000
276 000
Purchase of stock for cash
B
105 600
96 000
Payment to creditors
96 000
C
70 400
Repayment of loan
-
11 000
11 000
Interest on loan
-
1 500
1 400
Bank charges
2 500
?
2 300
Salaries and wages
80 000
80 000
84 000
Telephone
1 300
1 300
1 300
Advertising
3 000
3 000
3 000
Sundry expenses
?
6 400
6 600
Cash surplus (deficit)
124 000
246 600
(61 000)
Cash at the beginning of the month
20 000
144 000
390 600
Cash at the end of the month
144 000
390 600
329 600
Additional information
Cash sales make up 40% of the total sales a 5% discount is granted on these sales. The balance of the sales is on credit. All credit customers are expected to pay in the month after the sale.
The company uses a mark-up of 25% on cost at all times. Inventory is replaced on a monthly basis. 60% of all purchases are for cash, the rest are on credit. Creditors are paid in the month after the purchase.
4.2
Comment on the cash budget and provide recommendations, where applicable.
(8)
4.3
On 31 March 2018, the actual receipts and payments indicated the following for three items on the cash budget:
Rent income
R3 000
Advertising
R1 000
Telephone
R2 900
Comment on your observations and provide ONE (1) point of advice in each case.
CASH BUDGET FOR THE THREE MONTHS ENDED 31 MARCH 2018 JANUARY (R)
FEBRUARY (R)
MARCH (R)
RECEIPTS
428 200
534 600
215 000
Cash sales
A
83 600
76 000
Collection from debtors
180 000
144 000
132 000
Rent income
7 000
7 000
7 000
Loan from XYZ Bank
?
-
-
Ordinary share capital
-
300 000
-
PAYMENTS
304 200
288 000
276 000
Purchase of stock for cash
B
105 600
96 000
Payment to creditors
96 000
C
70 400
Repayment of loan
-
11 000
11 000
Interest on loan
-
1 500
1 400
Bank charges
2 500
?
2 300
Salaries and wages
80 000
80 000
84 000
Telephone
1 300
1 300
1 300
Advertising
3 000
3 000
3 000
Sundry expenses
?
6 400
6 600
Cash surplus (deficit)
124 000
246 600
(61 000)
Cash at the beginning of the month
20 000
144 000
390 600
Cash at the end of the month
144 000
390 600
329 600
Explanation / Answer
Cash Budget January February March Beginning Cash Balance 40000 77200 51200 Cash Receipt 517000 406000 479000 Loan Taken 0 0 32800 Total Available Cash 557000 483200 563000 Cash Disbursements 479000 352000 523000 Interest Expenses 800 Loan Payment 80000 Ending Cash Balance 77200 51200 40000 Loan Balance Beginning 80000 80000 0 Additional Loan(Loan Payment) 0 -80000 32800 Ending Loan 80000 0 32800
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