B Com Exam  >  B Com Notes  >  Cost Accounting  >  Solved Questions: Cash Budget

Solved Questions: Cash Budget | Cost Accounting - B Com PDF Download

Q1:  Saurashtra Co. Ltd. wishes to arrange overdraft facilities with its bankers from the period August to October 2019 when it will be manufacturing mostly for stock. Prepare a cash budget for the above period from the following data given below:

Solved Questions: Cash Budget | Cost Accounting - B Com

Additional Information:

(a) Cash on hand 1‐08‐2010 Rs.25,000.
(b) 50% of credit sales are realized in the month following the sale and the remaining 50% in the second month following. Creditors are paid in the month following the month of purchase.
(c) Lag in payment of manufacturing expenses half month.
(d) Lag in payment of other expenses one month.

Sol:

CASH BUDGET

Solved Questions: Cash Budget | Cost Accounting - B Com

Working Note:

1. Manufacturing Expense:

Solved Questions: Cash Budget | Cost Accounting - B Com

2. Sales

Solved Questions: Cash Budget | Cost Accounting - B Com

Q2: S. K. Brothers wish to approach the bankers for temporary overdraft facility for the period from October 2019 to December 2019. During the period of this period of these three months, the firm will be manufacturing mostly for stock. You are required to prepare a cash budget for the above period.

Solved Questions: Cash Budget | Cost Accounting - B Com

(a) 50% of credit sales are realized in the month following the sales and remaining 50% in the second following. (b) Creditors are paid in the month following the month of purchase (c) Estimated cash as on 1‐10‐2019 is Rs.50,000.

Solved Questions: Cash Budget | Cost Accounting - B Com

Working Note: Collection from debtors

Solved Questions: Cash Budget | Cost Accounting - B Com

Q3: TATA Co. Ltd. is to start production on 1st January 2019. The prime cost of a unit is expected to be Rs. 40 (Rs. 16 per materials and Rs. 24 for labour). In addition, variable expenses per unit are expected to be Rs. 8 and fixed expenses per month Rs. 30,000. Payment for materials is to be made in the month following the purchase. One‐third of sales will be for cash and the rest on credit for settlement in the following month. Expenses are payable in the month in which they are incurred. The selling price is fixed at Rs. 80 per unit. The number of units to be produced and sold is expected to be: January 900; February 1200; March 1800; April 2000; May 2,100; June 2400 Draw a Cash Budget indicating cash requirements from month to month.

Sol: 
CASH BUDGET of TATA LTD.

Solved Questions: Cash Budget | Cost Accounting - B Com

Q4: Prepare a Cash Budget from the data given below for a period of six months (July to December)

Solved Questions: Cash Budget | Cost Accounting - B Com

(2) Collect ion est imates: 

  • Within the month of sale: 5% 
  • During the month following the sale: 80% 
  • During the second month following the sale: 15% 

(3) Payment for raw materials is made in the next month. 
(4)Salary Rs. 11,250, Lease payment Rs. 3750, Misc. Exp. Rs. 1150, are paid each month 
(5) Monthly Depreciation Rs. 15,000 
(6) Income tax Rs. 26,250 each in September and December. 
(7) Payment for research in October Rs.75,000 
(8) Opening Balance on 1st July Rs.55,000.

CASH BUDGET

Solved Questions: Cash Budget | Cost Accounting - B Com

Note: Depreciation is a non‐cash item. It does not involve cash flow. Hence, depreciation will not be considered as payment through cash.

Q5: Prepare a cash Budget of R.M.C. LTD. for April, May and June 2019:

Solved Questions: Cash Budget | Cost Accounting - B Com

Additional Information: 
(i) 10% of the purchases and 20% of sales are for cash.
(ii) The average collection period of the company is ½ month and the credit purchases are paid regularly after one month.
(iii) Wages are paid half monthly and the rent of Rs. 500 included in expenses is paid monthly and other expenses are paid after one month lag.
(iv) Cash balance on April 1,2019 may be assumed to be Rs.15,000

Sol: 

CASH BUDGET

Solved Questions: Cash Budget | Cost Accounting - B Com

The document Solved Questions: Cash Budget | Cost Accounting - B Com is a part of the B Com Course Cost Accounting.
All you need of B Com at this link: B Com
106 videos|173 docs|18 tests

FAQs on Solved Questions: Cash Budget - Cost Accounting - B Com

1. What is a cash budget?
Ans. A cash budget is a financial plan that forecasts the cash inflows and outflows of a business over a specific period. It helps businesses determine their projected cash position and enables them to make informed decisions regarding their cash management and financial activities.
2. Why is a cash budget important for businesses?
Ans. A cash budget is important for businesses as it allows them to anticipate and plan for their cash needs. It helps in identifying potential cash shortages or surpluses, enables effective cash flow management, and assists in making strategic financial decisions such as planning investments, managing expenses, and arranging external financing if needed.
3. How is a cash budget prepared?
Ans. A cash budget is prepared by estimating the cash inflows and outflows for a specific period. The process involves analyzing historical data, sales projections, expenses, and other relevant financial information. Cash inflows can include revenue from sales, loans, investments, and other sources, while cash outflows consist of expenses such as salaries, rent, utilities, inventory purchases, and loan repayments.
4. What are the benefits of using a cash budget?
Ans. The benefits of using a cash budget include: 1. Improved cash flow management: A cash budget helps businesses optimize their cash flow by identifying periods of cash shortages or surpluses and taking appropriate actions. 2. Enhanced financial planning: It allows businesses to plan their financial activities, such as investments, expenses, and debt repayments, more effectively. 3. Better decision-making: A cash budget provides businesses with valuable insights into their cash position, enabling informed decisions about resource allocation, cost control, and financing options. 4. Early warning system: By forecasting potential cash shortages, a cash budget provides early warnings, allowing businesses to take proactive measures to mitigate risks. 5. Increased accountability: A cash budget promotes accountability within the organization by setting specific financial targets and monitoring actual cash flows against projections.
5. Can a cash budget be revised or updated?
Ans. Yes, a cash budget can be revised or updated as the actual financial performance of a business may differ from the initial projections. Revisions can be made based on changes in sales volumes, expenses, market conditions, or any other factors that impact cash inflows or outflows. Regular monitoring and comparison of actual cash flows against the budgeted amounts help businesses identify deviations and adjust their cash budget accordingly. It is important to maintain flexibility in the budgeting process to ensure its relevance and accuracy.
106 videos|173 docs|18 tests
Download as PDF
Explore Courses for B Com exam
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
10M+ students study on EduRev
Related Searches

video lectures

,

Solved Questions: Cash Budget | Cost Accounting - B Com

,

Viva Questions

,

Exam

,

MCQs

,

shortcuts and tricks

,

Free

,

Summary

,

practice quizzes

,

Sample Paper

,

Semester Notes

,

Extra Questions

,

past year papers

,

Solved Questions: Cash Budget | Cost Accounting - B Com

,

Previous Year Questions with Solutions

,

pdf

,

Solved Questions: Cash Budget | Cost Accounting - B Com

,

Objective type Questions

,

study material

,

mock tests for examination

,

Important questions

,

ppt

;