Question

Personal Budget

At the beginning of the school year, Craig Kovar decided to prepare a cash budget for the months of September, October, November, and December. The budget must plan for enough cash on December 31 to pay the spring semester tuition, which is the same as the fall tuition. The following information relates to the budget:

Cash balance, September 1 (from a summer job)	$7,010
Purchase season football tickets in September	100
Additional entertainment for each month	240
Pay fall semester tuition in September	3,800
Pay rent at the beginning of each month	340
Pay for food each month	190
Pay apartment deposit on September 2 (to be returned December 15)	500
Part-time job earnings each month (net of taxes)	870

a. Prepare a cash budget for September, October, November, and December. Use the minus sign to indicate cash outflows, a decrease in cash or cash payments.

Craig Kovar
Cash Budget
For the Four Months Ending December 31
	September	October	November	December
Estimated cash receipts from:
Part-time job	$	$	$	$
Deposit
Total cash receipts	$	$	$	$
Less estimated cash payments for:
Season football tickets	$
Additional entertainment		$	$	$
Tuition
Rent
Food
Deposit
Total cash payments	$	$	$	$
Cash increase (decrease)	$	$.	$	$
Plus cash balance at beginning of month
Cash balance at end of month	$	$	$	$

Feedback

b. Are the four monthly budgets that are presented prepared as static budgets or flexible budgets?

Static

c. What are the budget implications for Craig Kovar?

Craig can see that his present plan will not provide  sufficient cash. If Craig did not budget but went ahead with the original plan, he would be $ ________ short  at the end of December, with no time left to adjust.

Answer 1

Solution to (a)
		Particulars	September	October	November	December
		Estimated cash receipts from:
		Part-time job	$870.00	$870.00	$870.00	$870.00
		Deposit				$500.00
	A	Total cash receipts	$870.00	$870.00	$870.00	$1,370.00
		Less estimated cash payments for:
		Season football tickets	-$100.00
		Additional entertainment	-$240.00	-$240.00	-$240.00	-$240.00
		Tuition	-$3,800.00	$0.00	$0.00	$0.00
		Rent	-$340.00	-$340.00	-$340.00	-$340.00
		Food	-$190.00	-$190.00	-$190.00	-$190.00
		Deposit	-$500.00	$0.00	$0.00	$0.00
	B	Total cash payments	-$5,170.00	-$770.00	-$770.00	-$770.00
	C=A+B	Cash increase (decrease)	-$4,300.00	$100.00	$100.00	$600.00
	D	Plus cash balance at beginning of month	$7,010.00	$2,710.00	$2,810.00	$2,910.00
	C+D	Cash balance at end of month	$2,710.00	$2,810.00	$2,910.00	$3,510.00
Solution to (b)
	Are the four monthly budgets that are presented prepared as static budgets or flexible budgets?
	The four monthly budgets that are presented prepared as STATIC budgets because all figures are independent of itself rather than depending on revenue or some other factors
	Character Of Static Budget
	A static budget which is a forecast of revenue and expenses over a specific period remain unchanged even with increases or decreases in sales and production volume.
	Character Of Flexible Budget
	A flexible budget change or fluctuated with changes parameters such as in sales, production volumes, or business activity.
Solution to (c)
	Cash balance at end of december	$3,510.00
	Fee for spring semester tution fees	$3,800.00
	Short fall being		$290.00
	Craig can see that his present plan will not provide sufficient cash. If Craig did not budget but went ahead with the original plan, he would be $290 short at the end of December, with no time left to adjust.