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ANALYSIS OF A CASH BUDGET (20 marks)

Information regarding Jungle Traders, selling jungle gyms was provided. The bookkeeper partly completed the cash budget, but didnt complete it, for he was unsure how to do the debtors collection schedule.

INSTRUCTIONS

Complete the following and answer the questions regarding the cash budget.

2.1 Debtor collection schedule for the period 1 October 2019 to 31 December 2019. (8)

2.2 Answer the following questions:

2.2.1 Name TWO items that would not be included in the cash budget. Give ONE reason for you answer. (3)

2.2.2 Give ONE possible reason for the drastic increase in sales during December 2019. (1)

2.2.3 Comment on the cash situation of Jungle Traders at the end of the budgeted period. Refer to TWO possible reasons for the situation. (4)

2.2.4 Advise the owner how to improve the cash flow situation by giving him TWO suggestions. (4)

INFORMATION

1. The following balances were available on 1 October 2019:
   • Bank (dr) R59 000
   • Fixed deposit: GG Bank R80 000
2. 60% of the sales is on credit.
3. The debtors collection is expected to be as follows:
   • 10% in the month of sales (discount of 2% will be allowed)
   • 60% after 1 month
   • 20% after 2 months
   • The balance will be written off as bad debt.
4. Cash purchases represent 75% of total purchases.

3. Creditors are paid in full after 30 days. No discount will be received.

5. During November 2019 a new vehicle will be purchased and paid by cheque. Depreciation is calculated at 15% per annum on cost price
6. In December 2019, the owner is going to request a bank overdraft of R25 000 at the bank.
7. All interests will be capitalised.

CASH BUDGET OF JUNGLE TRADERS FOR THE PERIOD:

1 OCTOBER 2019 31 DECEMBER 2019

	OCTOBER 2019	NOVEMBER 2019	DECEMBER 2019
CASH RECEIPTS
Cash sales	?	40 000	95 000
Receipts from debtors	?	?	?
Rent income	15 000	0	0
TOTAL RECEIPTS	?	?	?
CASH PAYMENTS
Cash purchases	45 000	57 000	68 000
Payments to creditors	12 600	15 000	19 000
Vehicle purchased		75 000
Water and electricity	8 500	10 500	10 500
Salaries and wages	45 800	45 800	58 000
TOTAL PAYMENTS	111 900	203 300	155 500
Cash surplus/(deficit)	(22 755)	?	(305)
Bank: opening balance	59 000	36 245	(79 675)
Bank: closing balance	36 245	(79 675)	(79 980)

[20]

ANSWER SHEET FOR 2.1 (20 marks)

2.1 Debtor collection schedule for the period 1 October 2019 to 31 December 2019.

Month	Credit sales	October 2019	November 2019	December 2019
Total 30 Sept. 2019		34 000	10 000
October	52 500
November				36 000
December	142 500

(8)

Please provide all working out step by step.

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