Question

Husam Trading Company is in the business of buying and selling of different types of electronics products in Nizwa 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
125,000	135,000	148,200	175,800	125,900	129,100	115,200

The sales reported every month including cash sales and credit sales. Cash sales constitute 50% of total sales collected in the month of sales and the balance is credit sales received in two months 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
10,000	12,000	14,000	16,000	18,000	20,000	22,000

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
78,500	68,750	62,500	72,600	59,800	49,600	55,000

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

It is also found from the accounting records that the company purchased plant and equipment for RO 15,000 in the month of March and it is payable in three equal instalments starting from April. Tax department has sent a notice to the company to pay taxes of RO 2,000 each in the month from May, June and July.

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	8,000	7,500	6,500	7,980	6,500	8,900	6,600
Office Expenses	5,000	5,750	5,850	5,500	7,500	2,300	4,500

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

January	February	March	April	May	June	July
3,850	2,500	6,500	5,500	6,500	3,300	4,500

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
3,500	2,200	4,500	1,600	3,300	3,000	2,300

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 27,500.

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

Answer 1

Cash Budget	April	May	June
Beginning Cash Balance	27500	72100	98170
Cash Receipts:-
Cash Receipt from Sales	155400	137050	152450
Total Cash Available (A)	182900	209150	250620
Cash Disbursements:-
Cash Payment for Purchase	84750	80500	92600
Installment for purchase of Plant & Equipment	5000	5000	5000
Tax payment		2000	2000
Wages paid in following month	6500	7980	6500
Office expense paid in following month	5850	5500	7500
Selling expense paid in following month	6500	5500	6500
Administrative expense paid after two month	2200	4500	1600
Total Cash Disbursement (B)	110800	110980	121700
Ending Cash Balance (A) - (B)	72100	98170	128920

Explanations :-

Cash Receipt from Sales	April	May	June
Total Sales	175800	125900	129100
Cash Sales collected in same month (50% of Total sales) (a)	87900	62950	64550
Credit sales collected after two month of sale (b)	67500	74100	87900
Total cash Receipt from sales (a) + (b)	155400	137050	152450

Cash Payment for Purchase	April	May	June
Cash Purchase paid in same month of purchase	16000	18000	20000
Credit purchase paid after two month of purchase	68750	62500	72600
Total Cash payment for purchase	84750	80500	92600