Cash Budgeting
Sinead Sammon provides the following information in May 2008: €
Debtors 01/06/2008 (made up of April sales €52,000 and May sales €63,000) 115,000
Creditors 01/06/2008 44,000
Bank Balance 01/06/2008 34,000
She expects her sales, purchases and expenses for the next five months to be:
June July August September October
Sales € 59,000 67,000 75,000 83,000 91,000
Purchases € 36,000 48,000 60,000 69,000 74,000
Expenses € 12,000 17,000 14,000 16,000 15,000
You are given the following additional information:
- Expenses are paid as they are incurred - Leaving Cert Accounting - Question 9 - 2009
Question 9
Cash Budgeting
Sinead Sammon provides the following information in May 2008: €
Debtors 01/06/2008 (made up of April sales €52,000 and May sales €63,000) 115,... show full transcript
Worked Solution & Example Answer:Cash Budgeting
Sinead Sammon provides the following information in May 2008: €
Debtors 01/06/2008 (made up of April sales €52,000 and May sales €63,000) 115,000
Creditors 01/06/2008 44,000
Bank Balance 01/06/2008 34,000
She expects her sales, purchases and expenses for the next five months to be:
June July August September October
Sales € 59,000 67,000 75,000 83,000 91,000
Purchases € 36,000 48,000 60,000 69,000 74,000
Expenses € 12,000 17,000 14,000 16,000 15,000
You are given the following additional information:
- Expenses are paid as they are incurred - Leaving Cert Accounting - Question 9 - 2009
Step 1
Indicate what information Sinead can get from the prepared cash budget.
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Answer
From the prepared cash budget, Sinead can ascertain the following information:
Cash Inflows and Outflows: The budget provides a clear overview of all cash received and paid out over the specified months, allowing her to understand her liquidity position.
Surplus or Deficit: By calculating the net cash flow each month, she can identify months where there is a cash surplus (more inflows than outflows) or a cash deficit (more outflows than inflows).
Bank Overdrafts: Should her closing cash balances drop below zero, the budget would indicate months where a bank overdraft might be necessary.
This information is crucial for effective financial planning, ensuring Sinead can manage her cash resources efficiently.
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