Question

Case Study 4

Husain Trading Company is dealing in different kinds of buying and selling of goods to vast range of customers in Muscat region and provided the following data to understand the cash position every month start from January to July. The sales book reported the sales amount for seven months as below: -

January	February	March	April	May	June	July
555,000	475,000	485,000	505,000	598,000	526,000	565,000

The sales reported every month including cash sales and credit sales. Cash sales constitute 35% of total sales collected in the month of sales and the balance is credit sales received in the month following the month of sales.

The detail of goods purchased in cash during seven months reported in purchase book as below: -

January	February	March	April	May	June	July
28,500	29,500	30,500	36,500	36,500	37,800	36,900

Company also purchased goods on credit from different suppliers. The detail of credit purchase from the month January to July is given below: -

January	February	March	April	May	June	July
225,800	235,890	246,900	246,980	298,520	249,850	215,890

Cash purchases payable in the month of purchases and credit purchases are payable to supplier in one month following the month of credit purchase.

It is also found from the accounting records that the company has purchased a machine for RO 32,000 in April and it is payable in two equal instalments starting from May. Tax department has sent a notice to the company to pay taxes of RO 5,750 each in the month of April and May.

The wages and office expenses are paid in the month following the month in which wages and office expenses incurred. The detail of wages and office expenses is given below: -

	January	February	March	April	May	June	July
Wages	3,250	3,200	3,150	3,650	3,350	3,450	3,260
Office Expenses	4,300	4,150	4,250	4,160	4,160	4,280	4,120

The selling expenses of the company recorded for the seven months are as follows: -

January	February	March	April	May	June	July
2,250	2,650	2,450	2,680	2,290	2,780	2,500

The company also incurred administrative expenses for the period January to July. The detail of administrative expenses is given as below: -

January	February	March	April	May	June	July
2,600	2,650	2,750	2,650	2,890	2,990	3,020

The company is paying the selling expenses in one month following the month in which such expenses incurred and administration expenses in two months following the month in which such expenses incurred.

The cash balance as on 1^st April is RO 32,500.

Requirement: The Company has requested you to prepare Cash budget for the period of April to June.                                                                                                                              

Answer 1

Cash Budget
	April	May	June	Total
Beginning Balance	32,500	222,210	441,840	32,500
Cash Collections	492,000	537,550	572,800	1,602,350
Total Cash Available	524,500	759,760	1,014,640	1,634,850
Cash Disbursements
Purchases	283,400	283,480	336,320	903,200
Wages	3,650	3,350	3,450	10,450
Office Expenses	4,160	4,160	4,280	12,600
Selling Expenses	2,680	2,290	2,780	7,750
Administrative Expenses	2,650	2,890	2,990	8,530
Purchase of Machine		16,000	16,000	32,000
Tax Payment	5,750	5,750		11,500
Total Cash Disbursements	302,290	317,920	365,820	986,030
Ending Balance	222,210	441,840	648,820	648,820

Supporting Schedules

Cash collections schedule
	April	May	June	Total
Cash Sales	176,750	209,300	184,100	570,150
Collection from March Sales	315,250			315,250
Collection from April Sales		328,250		328,250
Collection from May Sales			388,700	388,700
Total Cash Collections	492,000	537,550	572,800	1,602,350

Cash Disbursements schedule for Purchase
	April	May	June	Total
Cash Purchases	36,500	36,500	37,800	110,800
Paid for Credit Purchases	246,900	246,980	298,520	792,400
Total Cash Disbursements	283,400	283,480	336,320	903,200

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