Cash budget is a budget that helps you manage your cash receipts and payments for upcoming periods. A cash budget can be prepared by small, medium, and large scale organizations on a monthly, quarterly, and yearly basis.
Assume a company trades car accessories and spare parts. The purchases for Jan, Feb and March are $50,000, $60,000 and $70,000. The suppliers are paid next month of purchases. Sales revenues for the three months are $110,000, $120,000 and $150,000. Only 50% of sales are collected from customers in the current month and 50% in the next month. The rent of the building is $30,000 which is paid after every three months. Salaries are $20,000 that are paid on the 30th of each month.
The monthly cash budget will be:
|
Jan |
Feb |
Mar |
|
|
Receipts: |
|||
|
Current Month collection |
55,000 |
60,000 |
75,000 |
|
Next Month collection |
55,000 |
60,000 |
|
|
Total Receipts |
55,000 |
115,000 |
135,000 |
|
Payments: |
|||
|
Salaries |
20,000 |
20,000 |
20,000 |
|
Payment to suppliers |
50,000 |
60,000 |
|
|
Building Rent |
30,000 |
||
|
Total Payments |
20,000 |
70,000 |
110,000 |
|
Net Cash= (Receipts - Payments) |
35,000 |
45,000 |
25,000 |
|
Opening Balance |
- |
35,000 |
80,000 |
|
Closing Balance |
35,000 |
80,000 |
105,000 |
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