Prepare Cash Budget - Ace Traders
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The following information pertains to Ace Traders for the three months ended 31 May 2007.
Actual March Budgeted
April May
R R R
Sales (20% for cash and 80% on credit) 360 000 380 000 400 000
Purchases (10% for cash and 90% on credit) 240 000 280 000 320 000
Salaries and Wages Paid 40 000 60 000 60 000
Cash Expenses 24 000 28 000 32 000
Depreciation 2 000 2 000 2 000
Additional Information:
1. It is expected that debtors will settle their accounts as follows:
- 20% in the month of sale
- 70% in the month after the month of sale, and
- 5% in the second month after the month of sale.
1. The remaining 5% is usually written off as bad debts.
2. Trade creditors are paid in the month after the purchases at a discount of 5%.
3. 50% of the salaries and wages are weekly wages. Because wages are paid weekly, usually 10% of the wages are paid in the month following the month in which they were incurred.
4. Expenses are paid as they arise.
5. The favourable bank balance on 1 April was R14 800.
REQUIRED:
Prepare the Cash Budget of Ace Traders for April and May 2007.
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Solution Summary
The expert prepares cash budgets for Ace Traders.
Education
- BE, Bangalore University, India
- MS, University of Wisconsin-Madison
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