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Needed a Test for i need a test for cash budget plz help me tomorrow i...

Test for Cash Budget

A cash budget is a financial plan that outlines the expected inflows and outflows of cash for a specific period. It is an important tool for businesses to ensure that they have enough cash to cover their expenses and debts. Here are some key points to keep in mind when preparing for a cash budget test.

Understanding Cash Budgets

- A cash budget is a detailed plan that outlines expected cash inflows and outflows for a specific period, usually a month or a year.
- It is important to understand the difference between cash inflows and outflows. Cash inflows refer to money that is expected to come into the business, such as sales revenue, loans, or investments. Cash outflows refer to money that is expected to go out of the business, such as salaries, rent, and loan payments.
- The purpose of a cash budget is to ensure that a business has enough cash to cover its expenses and debts. It helps businesses to plan their spending and adjust their operations to ensure that they are financially stable.

Preparing a Cash Budget

- When preparing a cash budget, it is important to start by estimating your expected cash inflows and outflows for the period.
- Cash inflows can include sales revenue, loans, investments, and any other sources of cash that you expect to receive during the period.
- Cash outflows can include expenses such as salaries, rent, loan payments, and any other costs that you expect to incur during the period.
- It is important to be as accurate as possible when estimating your cash inflows and outflows. You can use historical data, market research, and other sources of information to help you make informed estimates.

Analyzing a Cash Budget

- Once you have prepared your cash budget, you should analyze it to ensure that you have enough cash to cover your expenses and debts.
- You should compare your expected cash inflows to your expected cash outflows to determine whether you will have a cash surplus or a cash deficit.
- If you have a cash deficit, you may need to adjust your spending or find ways to increase your cash inflows. This could include reducing expenses, increasing sales revenue, or seeking additional financing.
- If you have a cash surplus, you may consider investing the excess cash in order to earn a return on your investment.

Conclusion

In conclusion, preparing a cash budget is an important part of financial planning for businesses. It allows businesses to plan their spending and ensure that they have enough cash to cover their expenses and debts. When preparing for a cash budget test, it is important to understand the key concepts behind cash budgets, how to prepare them, and how to analyze them. By following these guidelines, you can ensure that you are well-prepared for your exam.

Community Answer

Needed a Test for i need a test for cash budget plz help me tomorrow i...

1. From the information given below:
a) Sales are both on credit and for cash, the latter being one third of the former;
b) Realisations from debtors are 25% in the month of sale; 60%, in month following that
and the balance in the month after that;
c) The company adopts a uniform pricing policy of the selling price being 25% over cost;
d) Budgeted sales of each month are purchased and paid for in the preceding month;
e) The company has outstanding debentures of ` 2 lakhs on 1st January, which carry
interest at 15% per annum payable on the last date of each quarter on calendar year
basis. 20% of the debentures are due for redemption, on 30th June 2014;
f) The company has to pay the last instalment of advance tax, for assessment year 2014-
15, amounting to ₹54,000;
g) Anticipated office costs for the six-month period are; January ₹25,000; February ₹20,000; March ₹40,000; April ₹35,000; May ₹30,000 and June ₹45,000;
h) The opening cash balance of ₹10,000 is the minimum cash balance to be maintained.
Deficits have to be met by borrowings in multiples of ₹10,000 on which interest, on
monthly basis, has to be paid on the first date of the subsequent month at 12% p.a.
Interest is payable for a minimum period of one month.
i) Rent payable is ₹2,000 per month.
j) Sales forecast for the different months are:
Oct’13 - ₹160,000; Nov’13 - ₹1,80,000; Dec’13 - ₹2,00,000; Jan’14 - ₹2,20,000; Feb’14
- ₹1,40,000; Mar’14 - ₹1,60,000; Apr’14 - ₹1,50,000; May’14 - ₹2,00,000; Jun’14 -
₹1,80,000 and Jul’14 - ₹1,20,000.
Required
Prepare a Cash Budget of Excel Limited for the first half year of 2014, year of assuming that
costs would remain unchanged

2. Sri Ganesh has given the sales forecast for Jan to Jul 2014 and actual sales for Nov, Dec.
with the other particulars:
Sales (₹):
Nov’13………………………… 80,000 Apr’14………………………
1,00,000
Dec’13………………………… 70,000 May’14……………………… 90,000
Jan’14………………………… 80,000 Jun’14……………………… 1,20,000
Feb’14…………………………1,00,000 Jul’14……………………… .1,00,000
Mar’14 …………………………..80,000
Sales 20% cash 80% credit payable in the third month (Jan sales in Mar)
Variable expenses 5% on turnover, time lag half month.
Commission 5% on credit sales payable in the third month.
Purchases 60% of the sales of the third month.
Payment 3rd month of purchases.
Rent and .other expenses `3,000 paid every month.
Other payments: Fixed Assets Purchase March ₹50,000.
Taxes paid in Apr ₹20,000.
Opening cash balance ₹25,000.
Required
Prepare cash budget for five months Jan to May 2014.