Cash Management

Q. 1 Prepare cash Budget of Nilay and Co. for April, May and June 2004 -
Months Sales Purchases Wages Expenses
Rs. Rs. Rs. Rs.
Jan. (Actual) 8,000 4,500 2,000 500
Feb. (Actual) 8,000 4,000 1,800 600
March (Actual) 7,500 4,200 2,200 600
April (Budgeted) 9,000 5,000 2,400 700
May (Budgeted) 8,500 4,500 2,000 600
June (Budgeted) 8,000 3,500 1,800 600

Additional Information -
1. 10% of the purchases and 20% of sales are for cash.
2. The average collection period of the company is two months and credit
purchases are paid off regularly after one month.
3. Wages are paid half monthly and the rent of Rs. 50 included in expenses is
paid monthly and other expenses are paid after one month.
4. Cash Balance on 1st April may be taken at Rs. 1,500.

Q. 2 Sanjay Ltd. a newly started company, wishes to prepare a cash budget from January
to six months period. The following estimated revenue and expenses are given for the
purpose -
Sales Materials Wages Overheads
Months
(Rs.) (Rs.) (Rs.) (Rs.)
Jan. 20,000 20,000 4,000 4,000
Feb. 22,000 14,000 4,400 4,200
March 28,000 14,000 4,600 4,300
April 36,000 22,000 4,600 4,500
May 30,000 20,000 4,000 4,100
June 40,000 25,000 5,000 4,800

1. Cash balance on 1st January was Rs. 10000.

2. A new machinery is to be installed at Rs. 20000 on credit to be repaid by two
equal installments in March and April.
3. Sales commission @ 5% on total sales is to be paid within a month following
actual sales.
4. Rs. 10000 being the amount of second call may be received in March. Share
premium amounting to Rs. 2000 is also obtainable with the second call.
5. Term of collections and payments -
a. Period of credit allowed by creditors - 2 months.
b. Period of credit allowed to customers - 1 month.
c. Delay in payment of overheads - 1 month.
d. Delay in payment of wages - 1/2 month.
6. Assume cash sales to be 50% of total sales.

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Q. 3 You are required to prepare a cash budget for the last quarter of 2004 based on the
data available (as given below) for Neelam Ltd. :
i) Sales : Rs. Rs.
August 40,000 November 60,000
September 50,000 December 64,000
October 60,000
All sales are on credit. Half of these are collected in the month of sales, on which a
cash discount of 20% is allowed and other half are realized in the next month.
ii) Materials are purchased for cash on which a rebate of 5% is offered by the
suppliers. If the company buys on credit, payment can be deferred by one month by
foregoing the rebate. the purchase budget for the last quarter was -
October 25,000 Rs.
November 30,000 Rs.
December 36,000 Rs.
vii) The cash balance on 1-10-2004 may be taken at Rs. 30,000.

Q. 4 ABC company wishes to arrange overdraft facilities with its bankers during the
period of April to June of a particular year, when it will be manufacturing mostly for
stock. Prepare a cash budget for the above period from the following data, indicating
the extent of the bank facilities the company will require at the end of the each
month.
Sales Purchases Wages
a) Month
(Rs.) (Rs.) (Rs.)
February 1,80,000 1,24,000 12,000
March 1,92,000 1,44,000 14,000
April 1,08,000 2,43,000 11,000
May 1,74,000 2,46,000 10,000
June 1,26,000 2,68,000 15,000

b) 50% of the credit sales are realized in the month following the sales and the
remaining 50% sales in the following second month ; creditors are paid in the
following month of purchase.
c) Cash at bank on 1st April (estimated) Rs. 25,000

Q. 5 A company expects to have Rs. 37,500 cash in hand on 1st April and required you to
prepare an estimate of cash position during the three months, April, May and June.
The following information is supplied to you -
Factory Office Selling
Sales Purchases Wages
Expenses Expenses Expenses
Rs. Rs. Rs.
Rs. Rs. Rs.
February 75,000 45,000 9,000 7,500 6,000 4,500
March 84,000 48,000 9,750 8,250 6,000 4,500
April 90,000 52,500 10,500 9,000 6,000 5,250
May 1,20,000 60,000 13,500 11,250 6,000 6,570
June 1,35,000 60,000 14,250 14,000 7,000 7,000

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Other Information -
1. Period of credit allowed by suppliers 2 months.
2. 20% of sales is for cash and period of credit allowed to customers for credit is
one month.
3. Delay in payment of wages and all other expenses - 1 month.
4. Income tax of Rs. 57,500 is due to be paid on June 15th.
5. The company is to pay dividends to shareholders and bonus to workers of Rs.
15,000 and Rs. 22,500 respectively in the month of April
6. Plant has been ordered to be received and paid in May. It will cost Rs.
1,20,000.

Q. 6 The accountant of a company is preparing the cash budget of the first six months
(January - June of the current year) and obtain the following information :
Sales on credit, variable costs and wages are budgeted as follows (the November and
December of the previous year being the actual figures for those months) :
Credit Sales Variable Cost Wages
Months
Rs. Rs. Rs.
November 10,000 7,000 1,000
December 12,000 7,500 1,100
January 14,000 8,000 1,200
February 13,000 7,700 1,000
March 10,000 7,000 1,000
April 12,000 7,500 1,100
May 13,000 7,750 1,200
June 16,000 8,750 1,300

Fixed expenses amount to Rs. 1,500 net per month and the half year's preference
dividend of Rs 1,400 net is due on June 30.

Corporation tax amounting to Rs. 8,000 is payable in January and progress payment
under a building contract are due as follows-
March 31st Rs. 5,000 and May 31st Rs. 6,000

The terms on which goods are sold are net cash in the month following delivery.

Variable costs are payable 50% in the following month and balance in next to next
month.
Prepare the cash budget.

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Q. 7 Prepare Cash Budget for three months ending 30th June 2004 form the information given
below-
a) Month Sales Materials Wages Overhead
(Rs.) (Rs.) (Rs.) (Rs.)
February 14000 9600 3000 1700
March 15000 9000 3000 1900
April 16000 9200 3200 2000
May 17000 10000 3600 2200
June 18000 10400 4000 2300
b) Credit terms are -
Sales : 10 % of sales are on cash ; 50% of credit sales are collected next month and the
balance in the following month :
Creditors - Materials 2 months
Wages 1/4 month
Overhead 1/2 month
c) Cash and Bank balances on 1st April 2004 is expected to be Rs. 6000

Q. 8 Prepare the Cash Budget for 3 months ending on 30th June.

Months Sales Materials Wages Overheads
Jan. 60000 40000 11000 6200
Feb. 56000 48000 11600 6600
March 64000 50000 12000 6800
April 80000 56000 12400 7200
May 84000 62000 13000 8600
June 76000 50000 14000 8000
i) On 1st April the cash balance is Rs. 20000.
ii) Material and overheads are paid in the next month.
iii) Wages are paid in the same month.
iv) The sales are on credit basis half of which is received in the next month and balance in the
next to next.
v) 5 % commission on sales is to be paid in the next month of actual sales.
vi) Preferential dividend of Rs. 30000 is to be paid in the month of may.
vii) Calls on share of Rs. 25000 each is receivable in the month of April and June.
viii) The plant of Rs. 20000 is to be purchased in the month of April for which the payment
will be paid in
the month of June.

Q. 9 Following are the details of Apple Juice Co. prepare the Budget for three months ending 31st
December -
Sales
August 2003 75000
September 2003 60000
Oct. to Dec. 2003 80000 P.M.

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i) Half of the sale is on cash bases. 80% of the credit sales is received in the next month and
the balance in next to next month.
ii) In order to avail 5 % on cash discount the fruits are purchased on cash bases. The
requirements of fruits is 4000 baskets @ 10 per basket.
iii) The salary and wages are 15000 p.m.
vi) The other exp. are manufacturing exp. 13500 (for 3 months), selling exp. 9000 (for 3
months) and Office exp. 5000 p.m. for October and November. The Depreciation is 18000.

Q. 10 Genex Ltd. want to prepare the cash budget for six months ending on 30 th November. Balance
of cash on 1st June can be taken as 10000.
Months Sales Sales Purchase Wages Factory Admin. Research
Exp. Exp. Exp. Exp.
March 8200 500 4000 1000 840 340 200
April 8850 325 3700 800 568 250 240
May 8400 410 4000 840 595 276 240
June 9300 371 3906 880 544 248 240
July 7200 321 3990 600 588 260 240
August 8250 360 3500 960 600 252 260
Sept. 9860 345 3640 800 568 270 260
Oct. 9280 320 3650 840 536 256 260
Nov. 10440 320 3280 760 585 262 240
i) Delay in payment of wages 1/4 month.
ii) Delay in payment of Administrative overhead 1/2 month.
iii) Delay in payment of Factory overhead , Selling overhead and Research Exp. is 1 month.
iv) Credit provided by creditors 3 months.
v) Credit allowed to debtors 2 months.
vi) 5 % commission on sales is to be given after two months from the date of actual sales.
vii) A plant is to be purchased in June for Rs. 10000 which will be paid immediately and the
building will be purchased in June for Rs. 80000, the payment of which will be made in 4
equal installments. The first installment is due on 1st July.
viii) Interest on securities of Rs. 5000 will be received in May.
ix) It is anticipated that cash sales will be 200 p.m.
x) Rs. 1000 dividend will be paid in April.
xi) Tax will be paid of Rs. 3000 in the month of July.
xii) Calls to be received on 4000 shares @ 2 Rs. per share in November.

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