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Cash Budgeting Sheila Shannon provided the following information at the end of February 2019: Debtors 01/03/2019 (January sales €92,000 and February sales €62,000) €154,000 Creditors 01/03/2019 €35,000 Bank balance 01/03/2019 €15,500 Sheila expects her sales, purchases and expenses for the next five months to be: March April May June July Sales €101,000 €91,100 €86,000 €74,800 €71,100 Purchases €62,000 €12,000 €61,000 €46,000 €39,000 Expenses €7,000 €12,000 €11,000 €13,000 €15,500 You are given the following additional information: - All sales are on credit and are paid for two months after the month of sale - Leaving Cert Accounting - Question 9 - 2020
Question 9
Cash Budgeting Sheila Shannon provided the following information at the end of February 2019: Debtors 01/03/2019 (January sales €92,000 and February sales €62,000)... show full transcript
Worked Solution & Example Answer:Cash Budgeting Sheila Shannon provided the following information at the end of February 2019: Debtors 01/03/2019 (January sales €92,000 and February sales €62,000) €154,000 Creditors 01/03/2019 €35,000 Bank balance 01/03/2019 €15,500 Sheila expects her sales, purchases and expenses for the next five months to be: March April May June July Sales €101,000 €91,100 €86,000 €74,800 €71,100 Purchases €62,000 €12,000 €61,000 €46,000 €39,000 Expenses €7,000 €12,000 €11,000 €13,000 €15,500 You are given the following additional information: - All sales are on credit and are paid for two months after the month of sale - Leaving Cert Accounting - Question 9 - 2020
Step 1
Explain two items of information Sheila can get from the prepared cash budget.
Answer
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Cash Surplus or Deficit: The cash budget will indicate whether Sheila has a cash surplus or deficit at the end of each month. This information is crucial as it helps her make informed financial decisions for the upcoming months.
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Ability to Manage Overdrafts: The budget also shows how well Sheila can anticipate her cash movements. If a cash deficit is expected, it allows her to arrange for a bank overdraft in advance, ensuring she can meet her obligations without financial difficulty.