You are presented with the budgeted data shown in appendix A for the period November...
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Accounting
You are presented with the budgeted data shown in appendix A for the period November 2020 to June 2021 by your firm. It has been extracted from the other functional budgets that have been prepared. You are also told the following.
- Sales are 40% cash, 60% credit. Credit sales are paid two months after the month of sale.
- Purchases are paid the month following purchase.
- 75% of wages are paid in the current month and 25% the following month
- Overheads are paid the month after they are incurred.
- Dividends are paid three months after they are declared.
- Capital expenditure is paid two months after it is incurred.
- Opening cash balance is GHS15,000.
- The MD has arranged a bank overdraft with a ceiling of GHS50,000 to accommodate the increased inventory levels and wage bill for overtime worked.
Appendix A
|
NOV (2020) | DEC (2020) | JAN (2021) | FEB (2021) | MAR (2021) | APR (2021) | MAY (2021) | JUN (2021) | |
| Sales | 80,000 | 100,000 | 110,000 | 130,000 | 140,000 | 150,000 | 160,000 | 180,000 |
| Purchases | 40,000 | 60,000 | 80,000 | 90,000 | 110,000 | 130,000 | 140,000 | 150,000 |
| Wages | 10,000 | 12,000 | 16,000 | 20,000 | 24,000 | 28,000 | 32,000 | 36,000 |
| Overheads | 10,000 | 10,000 | 15,000 | 15,000 | 15,000 | 20,000 | 20,000 | 20,000 |
| Dividends | 20,000 | 40,000 | ||||||
| Capital | ||||||||
| expenditure
Required: | 30,000 | 40,000 | ||||||
| (a) Prepare a cash budget for the six months period January to June 2021. | ||||||||
| (b) Comment upon your results and offer advice to management | ||||||||
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