Question

a) Underline the main components which are considered while preparing a budget in a Company. What are the major considerations business owners should make as they budget and forecast?
b) Prepare a Cash budget for the Quarter April To June based on the following data and additional information.
Month Sales($) Purchase($) Wages($) Overheads($)

Jan 60,000 36,000 9,000 10,000

Feb 62,000 38,000 8,000 9,500

Mar 64,000 33,000 10,000 11,500

Apr 58,000 35,000 8,500 9,000

May 56,000 39,000 9,000 9,500

Jun 60,000 34,000 8,000 9,000

Additional Information: 1. Cash balance at 1st April is $800,000

2. Sales are 40% cash sales and 60% is collected in the following month.

3. All purchases of a month are paid after 2 months.

4. Land was purchased in April for $85,000

5. Wages of a month are paid the following month. All overheads are paid the same month.

6. Loan repaid in May $16,000

7. Dividend of $75,000 is expected to be received in May.

Answer 1

(a) Major Component which is considered while preparing budget of a company are Income, Expense, Overheads, Production, Admin Expenses, Fixed Expenses.

Business Owners should consider inflation when they Budget or forecast.

Cash budget for the Quarter April To June based on the following data and additional information is as prepared below:

Cash Budget
For Quarter Ending June 30
	April	May	June
Beginning Cash balance	800,000	719,600	784,800
Add: Collection from customers	$61,600	$57,200	$57,600
Add: Dividend expected		$75,000
cash available for use	$861,600	$851,800	$842,400
Less: cash Disbursements
Paid for purchases	$38,000	$33,000	$35,000
Paid for land	85,000
Paid for Wages	10,000	8,500	9,000
Paid for Overheads	9,000	9,500	9,000
Total disbursement	142,000	51,000	53,000
Cash surplus/Deficit	719,600	800,800	789,400
Financing
Borrowing
Repayment		-16,000
Interest
Net cash from Financing	0	-16,000	0
Budgeted ending cash balance	719,600	784,800	789,400
Sales Budget
For Quarter Ending June 30
	April	May	June
Sales	58,000	56,000	60,000
Cash sales	$23,200	$22,400	$24,000
Credit Sales	$38,400	$34,800	$33,600
Total collections	$61,600	$57,200	$57,600
March Sales = 64,000*.6