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L. Tarpey had the following Assets, Liabilities and Capital at 1 January 2011: Assets € Fixed assets 220,000 Stock 46,000 Cash 29,500 Debtors 322,800 Liabilities Creditors 22,800 300,000 Capital 322,800 The expected sales and purchases for the next 5 months are as follows: Sales Jan Feb Mar Apr May Total € 83,700 94,300 67,300 71,000 92,200 408,500 Purchases € 44,200 62,100 59,800 64,400 77,900 289,400 - All sales are on credit and are paid for one month after sale - Leaving Cert Accounting - Question 9 - 2011
Question 9
L. Tarpey had the following Assets, Liabilities and Capital at 1 January 2011: Assets € Fixed assets 220,000 Stock 46,000 Cash 29,500 Debtors 322,800 Liabilities ... show full transcript
Worked Solution & Example Answer:L. Tarpey had the following Assets, Liabilities and Capital at 1 January 2011: Assets € Fixed assets 220,000 Stock 46,000 Cash 29,500 Debtors 322,800 Liabilities Creditors 22,800 300,000 Capital 322,800 The expected sales and purchases for the next 5 months are as follows: Sales Jan Feb Mar Apr May Total € 83,700 94,300 67,300 71,000 92,200 408,500 Purchases € 44,200 62,100 59,800 64,400 77,900 289,400 - All sales are on credit and are paid for one month after sale - Leaving Cert Accounting - Question 9 - 2011
Step 1
A Cash Budget showing Tarpey’s expected monthly Receipts and Payments for the five months January to May 2011.
Answer
Cash Budget for the Period
| Month | Receipts (€) | Payments (€) | Net Cash (€) | Closing Cash (€) |
|---|---|---|---|---|
| Jan | 27,300 + 83,700 = 111,000 | 22,800 | 111,000 - 22,800 = 88,200 | 12,600 + 88,200 = 100,800 |
| Feb | 83,700 | 44,200 | 83,700 - 44,200 = 39,500 | 100,800 - 44,200 = 56,600 |
| Mar | 67,300 | 88,100 | 67,300 - 88,100 = -20,800 | 56,600 - 88,100 = -31,500 |
| Apr | 71,000 | 67,400 | 71,000 - 67,400 = 3,600 | -31,500 + 3,600 = -27,900 |
| May | 92,200 | 77,900 | 92,200 - 77,900 = 14,300 | -27,900 + 14,300 = -13,600 |
Summary
- Total Receipts: €343,600
- Total Payments: €359,300
- Net Cash Position: -€15,700
- Final Closing Cash Position: -€13,600
This cash budget helps to track the inflows and outflows, allowing for better financial decision-making.
Step 2
A Budgeted Balance Sheet as at 31/05/2011.
Answer
Budgeted Balance Sheet as at 31/05/2011
Fixed Assets:
- Fixed Assets: €220,000 + €17,000 (equipment) = €237,000
Current Assets:
- Stock: €56,400
- Debtors: €92,200
- Cash: Closing cash of €0 (after adjustments)
Total Current Assets: €148,600
Total Assets:
- Total: €237,000 + €148,600 = €385,600
Liabilities:
- Creditors: €77,900
Financing:
- Capital: €300,000 (+ Net Profit €22,500)
- Total: €322,500
Summary
This budgeted balance sheet provides a snapshot of Tarpey’s financial position at the end of May 2011.
Step 3
Outline two benefits for Tarpey in preparing a cash budget.
Answer
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Helps in Planning: A cash budget allows Tarpey to plan effectively for future cash flows ensuring that enough cash is available to meet obligations and avoid overdrafts.
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Financial Control: It provides a clear view of expected income and expenses, allowing Tarpey to make informed decisions and adjust operations to maintain financial health.