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    Cash Forecast; policies & procedures for gift shop

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    Bob Evans gift shop is going out of business and we have been approached by a wealthy person who wants to buy the business but does not know anything about the cash side of the business. He has asked us to put together some policies and procedures that he can use in running the business. These policies and procedures must address the cash receipts and cash payments. A monthly cash forecast must be prepared, for the first six months, showing the following:

    (1). Borrowed money ($250,000) to buy business making payments of principle and interest of $3,000.00 per month at 5% interest with a balloon payment at the end

    (2). Borrowed money ($100,000), to buy merchandise inventory, to be paid off over years at $2,000.00 principle and interest (4%) with a balloon payment at the end.

    (3). Hired one full time and three part time sales person (You pick the salaries).

    (4). Hired one full time manager (You pick the salaries).

    (5). Will have all the necessary expenses of running this type of business.

    (6). The business is being purchased on the first of August so, we have to budget merchandise purchases for the Christmas season.

    (7). We have purchased two electronic cash registers for the business.

    (8). There are no accounts receivable to worry about.

    What other things should we consider to be included in the budget?

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    Solution Preview

    Policies and procedures for a gift shop

    Cash receipts

    1. Sales in a gift shop will be a mix of cash and credit card sales. The registers should be 'balanced' at the close of business each day. The process includes the completion of a daily register or daily check out sheet. The format of the daily register begins with cash in the till plus cash sales plus credit sales minus any paid out expenses directly from the registers and minus the till cash. The ending amount is then compared to a physical count of the cash and credit card purchases. Any difference is noted as cash over and short.

    2. The net amount is removed from the register and deposited in a lock bank bag or used to prepare a deposit slip. Receipts should go to the bank daily. This is a control procedure which forces accountability on the part of sales people.

    3. Cash payments from the register should be discouraged, but there are times when small amounts would be paid out. Overdue postage might be an example, or a quick purchase of a small supply item. There should be a form to support any payment from the register. The form would give the amount, a description of the payment, and a signature of the ...

    Solution Summary

    The solution lists procedures for dealing with cash receipts, cash payments and cash controls, including 11 paragraphs of information for the three categories. In addition, there is narrative information and links for a cash forecast schedule. A format is presented in Excel with simplified information to demonstrate the preparation of a cash forecast. There is also information particular to this problem in preparing the forecast. It is a comprehensive solution.