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Cash Budgeting Sinead Sammon provides the following information in May 2008: € Debtors 01/06/2008 (made up of April sales €52,000 and May sales €63,000) 115,000 Creditors 01/06/2008 44,000 Bank Balance 01/06/2008 34,000 She expects her sales, purchases and expenses for the next five months to be: June July August September October Sales € 59,000 67,000 75,000 83,000 91,000 Purchases € 36,000 48,000 60,000 69,000 74,000 Expenses € 12,000 17,000 14,000 16,000 15,000 You are given the following additional information: - Expenses are paid as they are incurred - Leaving Cert Accounting - Question 9 - 2009

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Question 9

Cash-Budgeting--Sinead-Sammon-provides-the-following-information-in-May-2008:--€--Debtors-01/06/2008-(made-up-of-April-sales-€52,000-and-May-sales-€63,000)------115,000-Creditors-01/06/2008--------------------------------------------------------44,000-Bank-Balance-01/06/2008-------------------------------------------------------34,000--She-expects-her-sales,-purchases-and-expenses-for-the-next-five-months-to-be:---------------------June---------July-------August-------September------October-Sales-----------€-------------59,000------67,000--------75,000--------83,000--------91,000-Purchases------€-------------36,000------48,000--------60,000--------69,000--------74,000-Expenses-------€-------------12,000------17,000--------14,000--------16,000--------15,000--You-are-given-the-following-additional-information:----Expenses-are-paid-as-they-are-incurred-Leaving Cert Accounting-Question 9-2009.png

Cash Budgeting Sinead Sammon provides the following information in May 2008: € Debtors 01/06/2008 (made up of April sales €52,000 and May sales €63,000) 115,... show full transcript

Worked Solution & Example Answer:Cash Budgeting Sinead Sammon provides the following information in May 2008: € Debtors 01/06/2008 (made up of April sales €52,000 and May sales €63,000) 115,000 Creditors 01/06/2008 44,000 Bank Balance 01/06/2008 34,000 She expects her sales, purchases and expenses for the next five months to be: June July August September October Sales € 59,000 67,000 75,000 83,000 91,000 Purchases € 36,000 48,000 60,000 69,000 74,000 Expenses € 12,000 17,000 14,000 16,000 15,000 You are given the following additional information: - Expenses are paid as they are incurred - Leaving Cert Accounting - Question 9 - 2009

Step 1

Indicate what information Sinead can get from the prepared cash budget.

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Answer

From the prepared cash budget, Sinead can ascertain the following information:

  1. Cash Inflows and Outflows: The budget provides a clear overview of all cash received and paid out over the specified months, allowing her to understand her liquidity position.

  2. Surplus or Deficit: By calculating the net cash flow each month, she can identify months where there is a cash surplus (more inflows than outflows) or a cash deficit (more outflows than inflows).

  3. Bank Overdrafts: Should her closing cash balances drop below zero, the budget would indicate months where a bank overdraft might be necessary.

This information is crucial for effective financial planning, ensuring Sinead can manage her cash resources efficiently.

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