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Cash Budgeting Mary Harkin had the following assets, liabilities and capital on 01/01/2014 - Leaving Cert Accounting - Question 9 - 2014
Question 9
Cash Budgeting Mary Harkin had the following assets, liabilities and capital on 01/01/2014. Assets Fixed Assets 295,000 Stock 40,000 Cash 36,300 Debtors ... show full transcript
Worked Solution & Example Answer:Cash Budgeting Mary Harkin had the following assets, liabilities and capital on 01/01/2014 - Leaving Cert Accounting - Question 9 - 2014
Step 1
Prepare a Cash Budget showing Mary Harkin’s expected monthly Receipts and Payments for the five months January to May 2014 and also the total column for the period.
Answer
Cash Budget for Five Months: January - May 2014
| Month | January | February | March | April | May | Total |
|---|---|---|---|---|---|---|
| Receipts | ||||||
| Debtors | €26,400 | €76,840 | €54,300 | €78,200 | €67,800 | €304,540 |
| Cash | €0 | €0 | €24,000 | €0 | €0 | €24,000 |
| Total Receipts | €76,840 | €91,100 | €78,200 | €67,800 | €83,100 | €396,040 |
| Payments | | Cash for Purchases | €38,100 | €37,200 | €24,300 | €38,400 | €38,600 | €196,400 | | Wages | €18,600 | €18,600 | €18,600 | €18,600 | €18,600 | €93,000 | | Equipment | €0 | €0 | €9,000 | €0 | €0 | €9,000 | | Rent | €3,000 | €3,000 | €3,000 | €3,000 | €3,000 | €15,000 | | Total Payments | €59,700 | €58,800 | €54,900 | €60,000 | €60,000 | €293,400 |
| Net Cash Flow | €17,140 | €32,300 | €23,300 | €7,800 | €23,100 | €103,600 | | Opening Cash | €36,300 | €53,440 | €85,740 | €109,040 | €116,840 | | Closing Cash | €53,440 | €85,740 | €109,040 | €116,840 | €139,940 | €139,940 |
Step 2
Prepare a Budgeted Balance Sheet as at 31/05/2014.
Answer
Budgeted Balance Sheet as at 31/05/2014
| Fixed Assets | N.R.V. |
|---|---|
| Fixed Assets (295,000 + 9,000) | €304,000 |
| Current Assets | | | Stock | €26,300 | | Debtors | €81,100 | | Cash | €139,940 | | Total Current Assets | €247,340 |
| Current Liabilities | | | Creditors | €33,700 | | Working Capital | €213,640 | | Net Worth | €466,440 |
Step 3
Give two items of information Mary can get from the prepared cash budget.
Answer
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Liquidity Position: The cash budget provides insights into the liquidity position of the business, indicating whether Mary will have sufficient cash to meet her obligations.
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Planned Surplus/Deficit: It helps Mary identify projected cash surpluses or deficits for each month, allowing her to plan for additional financing if needed.