Question

Question 1

Delicious Catering Supply sells various equipment and supplies to restaurants in the local and surrounding communities. The company’s executive, Encik Haziq Azim, has requested your help in preparing a cash budget for the month of May & June. Encik Haziq Azim accumulated the following information for you:

(i) The cash balance at May 1 was estimated to be RM80,000.

(ii) Actual sales of April and May and budgeted sales for June are as follows:

	April RM	May RM	June RM
Cash sales	120,000	110,000	105,000
Credit sales	180,000	240,000	300,000
Total sales	300,000	350,000	405,000

(iii) Credit sales are collected over a two-month period. With 60% being collected in the first month and the remainder being collected in the second month.

(iv) The purchases are made of 70% total sales for the current month. All purchases are paid in full in the same month of purchases.

(v) Selling and administrative expenses are budgeted to be RM50,000 for each month which are included RM500 of depreciation.

(vi) Equipment costing RM90,000 will be purchased in June by cash.

(vii) Dividends of RM21,000 will be paid out in June.

Required:

(a) Explain the THREE (3) main advantages of budgeting.

(b) Prepare a schedule of collection for the month of May & June.

(c) Prepare a schedule of payment for the month of May & June.

(d) Prepare cash budget for the month of May & June.

Answer 1