CASH BUDGET

1. Prepare a Cash Budget for the period April June 2014:

A. Actual and Budgeted Sales MONTH

ACTUAL (Rs.)

MONTH

BUDGETED (Rs.)

January

90000

April

100000

February

90000

May

90000

March

80000

June

85000

B. Actual and Budgeted Purchases MONTH

ACTUAL (Rs.)

MONTH

BUDGETED (Rs.)

January

50000

April

60000

February

45000

May

55000

March

40000

June

40000

C. Actual and Budgeted Wages and Expenses MONTH

Actual
Wages(Rs.)

Actual
Expenses(Rs.)

MONTH

Budgeted
Wages(Rs.)

Budgeted
Expenses(Rs.)

January

25000

7000

April

30000

10000

Februar
y

20000

8000

May

25000

8000

March

28000

8000

June

22000

7000

D. Special Payment Advance income tax in May Rs.5000 and Plant in April Rs.15000.
E. Rent Rs.400 payable each month not included in expenses.
F. 10% of purchases and sales are on cash basis.
G. Credit purchases are paid after one month and credit sales are collected after two
months. Time lag in payment of wages and expenses are half month.
H. Cash and Bank balance on 1st April, 2014 Rs.15000.
2. Prepare a Cash Budget for Sept Dec2014.
Month

Credit Purchases

Credit Sales

Wages

Selling
Expenses

Overheads

July

85000

160000

32000

8000

10000

August

92000

185000

37000

9500

11500

Septembe
r

100000

210000

42000

10500

13000

October

120000

245000

49000

12500

14500

90000

178000

35500

8900

10500

November

December

98000

182000

36000

9000

11000

(a) Expected cash balance on 1st September Rs.10500.

(b) Period of credit allowed to debtors 2 months.
(c) Period of credit allowed by creditors 1 month.
(d) Lag in payment of wages, selling expenses and overheads 1 month.
(e) Selling Commission @2% on sales is payable one month after sales.
(f) Expenditure on Machinery worth Rs.50000 is payable in October.
(g) Expected Cash Sales per month Rs.15000. No commission on cash sales.
3. Prepare a Cash Budget for three months from June August2014.
MONTH

Sales(Rs.)

Purchases(R
s.)

Wages(Rs.)

Selling
Expenses(Rs.)

Overhead(Rs.
)

April

100000

70000

8500

3500

4000

May

120000

80000

9500

3500

4500

June

140000

90000

9500

3500

6000

July

160000

100000

12000

3500

6500

August

180000

110000

14000

3500

7000

(i) Bank balance on 1st June2014 Rs.10000.

(ii) A commission of 5% on sales due two months after sales is payable in addition to the
above selling expenses.
(iii) Credit terms of sales are payment by the end of the month following the month of
supply. On average half of the sales is paid on the due date, while the other half is paid
during the next month.
(iv) Creditors are paid
during the month following the month of supply.
(v) Plant purchased in June for Rs.78000 out of which Rs.48000 is payable on delivery and
the balance in two equal monthly installments in July & August.
(vi) A dividend of Rs.30000 will be paid in September.
(vii) Wages are paid three-fourth on due date while one-fourth during the next month.
(viii) Lag in payment of selling expenses and overhead 1 month.
4. Prepare a cash budget for the quarter ending December2014 MONTH

Sales(Rs.)

Purchases(Rs
.)

Overhead(Rs.
)

Depreciation
(Rs.)

Wages(Rs.)

August

84000

48000

8400

720

26000

September

52000

50000

6400

720

18000

October

56000

28000

7200

720

19200

November

64000

32000

6800

720

24000

December

76000

36000

7600

720

24000

(a) All purchases are on a credit basis and payments are made after two months from the
day of the transaction.
(b) 25% of the sales are on credit; the debtors are expected to settle their accounts in the
month after the month in which the transaction takes place.
(c) Wages are paid in cash as they become due.
(d) The bank balance on 1st October is estimated to be Rs.7200.
(e) Overheads other than Depreciation includes
(i) Gas & electricity charges: For August Rs.280, September Rs.300, October Rs.320,
November Rs.400 and December Rs.440. The accounts for Gas & electricity (quarter
ended 30th September) will be paid in October2014 and they are estimated to be Rs.860.
(ii) Rates: are paid half yearly in April & October and the rates for the year beginning 1st
April2014 amounts to Rs.7680.
(iii) Certain other items which are all cash transactions.
5. Prepare a Cash Budget for the first six months of 2014 (a) Sales are 80% on credit and 20% for cash.
(b) In terms of credit sales, 60% are collected in the month after the sale; 30% in the second
month and 10% in the third month. There are no bad debts.
(c) Sales are estimated as Month

Oct1
3

Nov1
3

Dec1
3

Jan1
4

Feb1
4

Mar1
4

Apr1
4

May1
4

Jun1
4

Jul1
4

Sales(Rs
.)

30000
0

40000
0

50000
0

25000
0

20000
0

20000
0

30000
0

25000
0

20000
0

3000
00

(d) The store has a gross margin of 20% on sales and pays for each month anticipated sales
in the preceding month.
(e) Wages and Salaries paid are Month
Amount
(Rs.)

Jan14

Feb14

Mar14

Apr14

May14

Jun14

30000

40000

50000

50000

40000

35000

(f) Rent Rs.200 per month.

(g) A quarterly payment of debenture interest is made in March and June on Rs.600000, 6%
Debentures.
(h) Monthly depreciation expense amounts to Rs.20000.
(i) A payment for capital equipment of Rs.30000 is due in June.
(j) Advance income tax due in April amounts to Rs.40000.
(k) Opening Cash balance was Rs.50000.
6. Prepare a cash budget for quarter ending June2014.
MONT
H

Sales (Rs.)

Purchases (Rs.)

Wages (Rs.)

Miscellaneous
Exp. (Rs.)

Februa
ry

120000

84000

10000

7000

March

130000

100000

12000

8000

April

80000

104000

8000

6000

May

116000

106000

10000

12000

June

88000

80000

8000

6000

(i) Sales -20% realized in the month of sale; discount allowed @ 2%; balance realized equally
in two subsequent months.
(ii) Purchases are paid for in the month following the month of supply.
(iii) Wages 25% are paid as arrears in the following month.
(iv) Miscellaneous Expenses are paid a month in arrears.
(v) Rent Rs.1000 per month are paid quarterly in advance due in April.
(vi) Income Tax first installment of advance tax Rs.25000 due on or before 15th June.
(vii) Income from Investment Rs.5000 realized quarterly in April, July, etc.
(viii) Cash in hand Rs.5000 on 1st April2014.

ANSWERS
1. Cash Balance
2. Cash Balance
3. Cash Balance
4. Cash Balance
5. Cash Balance
Rs.233000.
Rs.(62936).

Rs.10600; Rs.(9800); Rs.3800.

Rs.31800; Rs.12100; Rs.36200; Rs.147740.
Rs.(30500); Rs.(32375); Rs.(27875).
Rs.(15940); Rs.(33700); Rs.(19220).
Rs.268000; Rs.378000; Rs.313000; Rs.245000; Rs.301000;
6. Cash Balance Rs.5680; Rs.(7084);