Chapter 6
Budget & Budgetary control
Lecture: 01
Course Name: Management Accounting
Course Teacher: A.N.M. Badsha Miah
Topics that will be covered:
•
What is Budget?
•
Purposes & Advantages of Budgets
•
Forecasting vs. Budget
•
Clarify Responsibility Accounting
•
Discuss about Continuous or perpetual budgets, self-imposed budgets,
Zero-based budgeting.
What is Budget?
A budget is a detailed plan for the future that is usually expressed in formal
quantitative terms. Purposes of Budgets
Budgets are used for two distinct purposes planning and control.
Planning involves developing goals and preparing various budgets to achieve those
goals. Control involves gathering feedback to ensure that the plan is being properly
executed or modified as circumstances change.
Other essentials of budget include:
•
To motivate managers to strive to achieve budget goals
•
To evaluate the performance of managers
•
To provide visibility into the company's performance
•
For accountability
Advantages of Budgeting
Organizations realize many benefits from budgeting, including:
1
1 Budgets communicate management’s plans throughout the organization.
2 Budgets force manager to think about and plan for the future.
3 The budgeting process provides a means of allocating resources to those
parts of the organization where they can be used most effectively.
4 The budgeting process can uncover potential bottlenecks before they occur.
5 Budgets coordinate the activities of the entire organization by integrating
the plans of its various parts.
6 Budgets define goals and objectives that can serve as benchmarks for
evaluating subsequent performance.
Forecasting vs. Budget
Forecasting is a tool that projects what you want to happen, while budgeting helps
you manage what will happen.
Forecasting
Budget
The forecast is typically limited to major The budget is a detailed representation of
revenue and expense line items. There is the future results, financial position, and
usually no forecast for financial position, cash flows that management wants the
though cash flows may be forecasted.
business to achieve during a certain period
of time.
The forecast is updated at regular The budget may only be updated once a
intervals, perhaps monthly or quarterly.
year, depending on how frequently senior
management wants to revise information.
There is no variance analysis that The budget is compared to actual results to
compares the forecast to actual results.
determine
variances
from
expected
performance.
Changes in the forecast do not impact The budget to actual comparison can
performance-based compensation paid trigger changes in performance-based
to employees.
compensation paid to employees.
2
Responsibility Accounting
The basic idea underlying responsibility accounting is that a manager should be
held responsible for those items- and only those items- that the manager can
actually control to a significant extent.
Continuous or perpetual budgets
A continuous or perpetual budget is a 12-month budget that rolls forward one month
(or quarter) as the current month (or quarter) is completed.
The Self-Imposed Budget
A self-imposed budget or participative budget is a budget that is prepared with the
full cooperation and participation of managers at all levels.
Advantages of self-imposed budget
Self-imposed budget has a number of advantages:
1 Individuals at all levels of the organization are recognized as members of
the team whose views and judgments are valued by top management.
2 Budgets estimates prepared by front-line managers are often more accurate
and reliable than estimates prepared by top managers who have less intimate
knowledge of markets and day-to-day operations.
3 Motivation is generally higher when individuals participate in setting their
own goals than when the goals are imposed from above.
4 A manager who is not able to meet a budget that has been imposed from
above can always say that the budget was unrealistic and impossible to
meet.
Disadvantages of Self-imposed budget
1 Lower – level managers may make suboptimal budgeting recommendations
if they lack the broad strategic perspective possessed by top managers.
2 Self-imposed budgeting may allow lower-level managers to create too
much budgetary slack.
3
Zero-based budgeting
Zero-based budgeting is a method of budgeting in which all expenses must be
justified for each new period. Zero-based budgeting starts from a "zero base" and
every function within an organization is analyzed for its needs and costs.
Advantages of Zero-based budgeting
✓ Accuracy
✓ Efficiency
✓ Reduction in redundant activities
✓ Coordination and Communication
Disadvantages of Zero-based budgeting
✓ Time-Consuming
✓ High Manpower Requirement
✓ Lack of Expertise
Zero-Based Budgeting Vs. Traditional Budgeting
➢ In traditional budgeting, emphasis is given on previous level of expenditure,
whereas, in ZBB, every time a budget is prepared, new economic appraisal
is made.
➢ Traditional budgeting is a function which is accounting oriented, whereas,
ZBB is a function which is project or decision oriented.
➢ For the preparation of a traditional project, re-justification of the existing
program is not needed, whereas, for the preparation of a zero-base
budgeting, the justification of existing & new projects is needed to be done
in the light of benefits & costs.
➢ In the case of traditional budget, the justification regarding why, for a
particular decision unit, a particular amount of expenditure is decided upon,
is justified by the top management, whereas, in case of ZBB, the amount of
expenditure is justified by the manager of the decision unit & not the top
management.
4
➢ In the case of traditional budgeting, the amount to added with or deleted
from the figures of the previous budget figures is only taken into account,
whereas, in case of ZBB, existing level of expenditure is appraised & the
justification of future proposal for expenditure is done from different
angles.
➢ Preparation of a traditional budget is a simple job which is done year after
year monotonously, whereas, preparation of a zero-base budgeting requires
logical approach & many complex steps are involved for the establishment
of logic behind a proposal.
Lecture: 02
Topics that will be covered:
•
Definition of Master Budget
•
Elements of Master budget
•
The master budget interrelationship
•
Different mathematical problems
Master Budget
The master budget is a summary of company's plans that sets specific targets for
sales, production, distribution and financing activities. It generally culminates in a
cash budget, a budgeted income statement, and a budgeted balance sheet. In short,
this budget represents a comprehensive expression of management's plans for
future and how these plans are to be accomplished.
Following are the major components or parts of master budget:
•
Sales budget
•
Production budget
•
Material budgeting/Direct material budget
•
Labor budget
5
•
Manufacturing overhead budget
•
Ending finished goods inventory budget
•
Cash budget
•
Selling and administrative expense budget
•
Purchases budget for a manufacturing firm
•
Budgeted income statement
•
Budgeted balance sheet
6
(Lecture 2) Question-01
(Production and Direct Materials Budgets)
Pearl Products Limited of Shenzhen, China, manufactures and distributes toys
throughout South East Asia. Three cubic centimeters (cc) of solvent H300 are
required to manufacture each unit of Supermix, one of the company’s products. The
company is now planning raw materials needs for the third quarter, the quarter in
which peak sales of Supermix occur. To keep production and sales moving
smoothly, the company has the following inventory requirements:
a. The finished goods inventory on hand at the end of each month must be
equal to 3,000 units of Supermix plus 20% of the next month’s sales. The
finished goods inventory on June 30 is budgeted to be 10,000 units.
b. The raw materials inventory on hand at the end of each month must be equal
to one-half of the following month’s production needs for raw materials.
The raw materials inventory on June 30 is budgeted to be 54,000 cc of
solvent H300.
c. The company maintains no work in process inventories. A sales budget for
Supermix for the last six months of the year follows.
Budgeted Sales in Units
July . . . . . . . . . . . . . . . . 35,000
August . . . . . . . . . . . . . . 40,000
September . . . . . . . . . . . 50,000
October . . . . . . . . . . . . . 30,000
November . . . . . . . . . . . 20,000
December . . . . . . . . . . . 10,000
Required:
1 Prepare a production budget for Supermix for the months July, August,
September, and October.
7
2 Examine the production budget that you prepared in (1) above. Why will
the company produce more units than it sells in July and August, and fewer
units than it sells in September and October?
3 Prepare a direct materials budget showing the quantity of solvent H300 to
be purchased for July, August, and September, and for the quarter in total.
Solution-01
a. Production budget:
July
August
September
October
35,000
40,000
50,000
30,000
Add: Units of ending inventory 11,000
13,000
9,000
7,000
Total needs
46,000
53,000
59,000
37,000
beginning 10,000
11,000
13,000
9,000
Required production in units 36,000
42,000
46,000
28,000
Budgeted unit sales
Less:
Units
of
inventory
b. During July and August, the company is building inventories in anticipation
of peak sales in September. Therefore, production exceeds sales during
these months. In September and October inventories are being reduced in
anticipation of a forthcoming decrease in sales
c. Direct material budget:
July
August
September
Third
Quarter
Required production in 36,000
units
42,000
46,000
124,000
Units of raw materials X 3 cc
needed per unit
X3 cc
X 3 cc
X 3 cc
8
Units of raw materials 108,000
needed to meet production
126,000
138,000
372,000
Add: Units of ending raw 63,000
materials
69,000
42,000a
42000
Total units of
materials needed
195000
180000
414000
Less: Units of beginning 54000
raw materials
63000
69000
54000
Units of raw materials to 117000
be purchased
132000
111000
360000
raw 171000
a
28, 000 units (October production) X 3 cc per unit = 84,000 cc; 84,000 cc X1/2=
42,000 cc
Question-02
(Direct Labor and Manufacturing Overhead Budgets)
The Production Department of Hruska Corporation has submitted the following
forecast of units to be produced by quarter for the upcoming fiscal year:
1st Quarter
12,000
2nd Quarter
10,000
3rd Quarter
13,000
4th Quarter
14,000
Each unit requires 0.2 direct labor-hours and direct laborers are paid Tk.12.00 per
hour. In addition, the variable manufacturing overhead rate is Tk.1.75 per direct
labor-hour. The fixed manufacturing overhead is Tk.86,000 per quarter. The only
noncash element of manufacturing overhead is depreciation, which is Tk.23,000
per quarter.
Required:
1 Prepare the company’s direct labor budget for the upcoming fiscal year,
assuming that the direct labor workforce is adjusted each quarter to match
9
the number of hours required to produce the forecasted number of units
produced.
2 Prepare the company’s manufacturing overhead budget.
Solution-02
Hruska Corporation
Direct Labor Budget
Required production in units
Direct labor time per unit (hours)
Total direct labor-hours needed
Direct labor cost per hour
Total direct labor cost
Q1
Q2
Q3
Q4
12,000
0.2
2400
Tk. 12
Tk 28800
10,000
0.2
2000
Tk. 12
Tk 24000
13000
0.2
2600
Tk. 12
Tk 31200
14,000
0.2
2800
Tk. 12
Tk 33600
Total
49,000
0.2
9800
Tk. 12
Tk 117600
Hruska Corporation
Manufacturing overhead Budget
Budgeted direct labor-hours
Variable manufacturing
overhead rate
Variable manufacturing
overhead
Fixed manufacturing overhead
Total Manufacturing
overhead
Less: Depreciation
Cash disbursement for
manufacturing overhead
Q1
2400
Tk. 1.75
Q2
2000
Tk. 1.75
Q3
2600
Tk. 1.75
Q4
2800
Tk. 1.75
Total
9800
Tk. 1.75
Tk. 4,200
Tk. 3,500
Tk. 4,550
Tk. 4,900
Tk. 17,150
Tk. 86,000 Tk. 86,000
Tk. 86,000 Tk. 86,000 Tk. 86,000
Tk 90200
Tk 90550
Tk 89500
Tk. 23,000 Tk. 23,000
Tk 67200 Tk 66500
10
Tk 90900
Tk 361150
Tk. 23,000 Tk. 23,000 Tk. 23,000
Tk 67550 Tk 67900 Tk 269150
Question-03 (Direct Materials and Direct Labor Budgets)
The production department of Zan Corporation has submitted the following
forecast of units to be produced by quarter for the upcoming fiscal year:
1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
5,000
8,000
7,000
6,000
In addition, the beginning raw materials inventory for the 1st Quarter is budgeted
to be 6,000 grams and the beginning accounts payable for the 1st Quarter is
budgeted to be Tk.2,880. Each unit requires 8 grams of raw material that costs
Tk.1.20 per gram. Management desires to end each quarter with an inventory of
raw materials equal to 25% of the following quarter’s production needs. The desired
ending inventory for the 4th Quarter is 8,000 grams. Management plans to pay for
60% of raw material purchases in the quarter acquired and 40% in the following
quarter. Each unit requires 0.20 direct labor hours and direct laborers are paid
Tk.11.50 per hour.
Required:
1 Prepare the company’s direct materials budget and schedule of expected
cash disbursements for purchases of materials for the upcoming fiscal
year.
2 Prepare the company’s direct labor budget for the upcoming fiscal year,
assuming that the direct labor workforce is adjusted each quarter to match
the number of hours required to produce the forecasted number of units
produced.
11
Solution-03
Zan Corporation
Direct Materials Budget
Required production in units
Units of raw materials needed
per
Units of raw materials
needed to meet production
Add: Units of ending raw
material
Total units of raw materials
needed
Less: Units of beginning raw
materials
Units of raw materials to be
purchased
Unit cost of raw materials
Cost of raw materials to be
purchased
Q1
Q2
Q3
Q4
Year
5000
8000
7000
6000
26000
X8
X8
X8
X8
X8
40000
64000
56000
48000
208000
16000
14000
12000
8000
8000
56000
78000
68000
56000
216000
6000
16000
14000
12000
6000
50000
62000
54000
44000
210000
X 1.20 X 1.20
64800 52800
X 1.20
252000
X 1.20 X 1.20
60000 74400
Schedule of Expected Cash Disbursements for Materials
Q1
Beginning accounts payable
Tk.2880
1st Quarter purchases
36000
2nd Quarter purchases
3rd Quarter purchases
4th Quarter purchases
Total cash disbursements for
38880
materials
Q2
Q3
24000
44640 29760
38880
68640 68640
Q4
Year
Tk.2880
60000
74400
25920
64800
31680
31680
57600 233760
Zan Corporation
Direct Labor Budget
Q1
Q2
Q3
Q4
Year
5000
8000
7000
6000
26000
X 0.20 X 0.20 X 0.20 X 0.20 X 0.20
Required production in units
Direct labor-hours per unit
12
Total direct labor-hours needed
Direct labor cost per hour
Total direct labor cost
1,000
11.50
11500
1,600
11.50
18400
1,400
11.50
16100
1200
11.50
13800
(Lecture 3) Question-01
Garden Sales, Inc., sells garden supplies. Management is planning its cash needs
for the second quarter. The company usually has to borrow money during this
quarter to support peak sales of lawn care equipment, which occur during May. The
following information has been assembled to assist in preparing a cash budget for
the quarter:
a. Budgeted monthly absorption costing income statements for April–July are:
April
May
June
July
Sales
600000 900000 500000 400000
Cost of goods sold
420000 630000 350000 280000
Gross margin
180000 270000 150000 120000
Selling and administrative expenses
Selling expense
79000 120000 62000
51000
Administrative expenses
45000 52000 41000
38000
Total selling and administrative 124000 172000 103000 89000
expenses
Net operating income
56000 98000 47000
31000
b. Sales are 20% for cash and 80% on account.
c. Sales on account are collected over a three-month period with 10% collected
in the month of sale; 70% collected in the first month following the month
of sale; and the remaining 20% collected in the second month following the
month of sale. February’s sales totaled Tk.200,000, and March’s sales
totaled Tk.300,000.
d. Inventory purchases are paid for within 15 days. Therefore, 50% of a
month’s inventory purchases are paid for in the month of purchase. The
remaining 50% is paid in the following month. Accounts payable at March
31 for inventory purchases during March total Tk.126,000.
e. Each month’s ending inventory must equal 20% of the cost of the
merchandise to be sold in the following month. The merchandise inventory
at March 31 is Tk.84,000.
f. Dividends of Tk.49,000 will be declared and paid in April.
g. Land costing Tk.16,000 will be purchased for cash in May.
13
5200
11.50
59800
h. The cash balance at March 31 is Tk.52,000; the company must maintain a
cash balance of at least Tk.40,000 at the end of each month.
i. The company has an agreement with a local bank that allows the company
to borrow in increments of Tk.1,000 at the beginning of each month, up to
a total loan balance of Tk.200,000. The interest rate on these loans is 1%
per month and for simplicity we will assume that interest is not
compounded. The company would, as far as it is able, repay the loan plus
accumulated interest at the end of the quarter.
Required:
1 Prepare a schedule of expected cash collections for April, May, and June,
and for the quarter in total.
2 Prepare the following for merchandise inventory:
a. A merchandise purchases budget for April, May, and June.
b. A schedule of expected cash disbursements for merchandise
purchases for April, May, and June, and for the quarter in total.
3 Prepare a cash budget for April, May, and June as well as in total for the
quarter.
Solution-01
1. Collection on sales:
Cash sales
Sales on account:
February: Tk.
200,000X80%X20%
March: Tk.
300,000X80%X70%X20%
April: Tk.
600,000X80%X10%,70%,20%
May: Tk.
900,000X80%X10%,70%
June: Tk. 500,000X80%X10%
Total cash collections
April
May
June
Quarter
Tk. 120,000
Tk.180,000 Tk.100,000 Tk.400,000
32,000
168,000
48,000
48,000
336,000
96,000
480,000
72,000
504,000
576,000
Tk. 368,000
14
Tk. 636,000
216,000
40,000
40,000
Tk. 740,000 Tk. 1,744,000
2.
a. Merchandise purchases budget:
Budgeted cost of goods sold
Add: Desired ending inventory
Total needs
Less: Beginning inventory
Required inventory purchases
April
Tk. 420,000
May
Tk. 630,000
126,000
546,000
84,000
Tk. 462,000
70,000
700,000
126,000
Tk.574,000
June
July
Tk. Tk. 280,000
350,000
56,000
406,000
70,000
Tk.336,000
b. Schedule of expected cash disbursements for merchandise purchases:
Beginning accounts payable
April purchases
May purchases
June purchases
Total cash disbursements
April
Tk.126,000
231,000
Tk.357,000
May
231,000
287,000
Tk.518,000
June
287,000
168,000
Tk.455,000
Quarter
Tk.126,000
462,000
574,000
168,000
Tk.1,330,000
Garden Sales, Inc.
Cash Budget
For the Quarter Ended June 30
April
May
Beginning cash balance
Tk.52,000 Tk.40,000
Add: Collections from customers
368,000
636,000
Total cash available (a)
420,000
676,000
Less: Cash disbursements:
Purchase of inventory
357,000
518,000
Selling expenses
79,000
120,000
Administrative expenses
25,000
32,000
Land purchases
------16,000
Dividend paid
49,000
-------Total cash disbursements (b)
510,000
686,000
Excess(deficiency) of cash available
(90,000)
(10,000)
over disbursements (c ) = (a-b)
Financing:
Borrowings
130,000
50,000
Repayments
0
0
15
June
Tk.40,000
740,000
780,000
Quarter
Tk.52,000
1,744,000
1,796,000
455,000
62,000
21,000
------------538,000
242,000
1,330,000
261,000
78,000
16,000
49,000
1,734,000
62,000
0
(180,000)
180,000
(180,000)
Interest
(Tk.130,000X1%X3+50,000X1%X2)
Total financing (d)
130,000
Ending cash balance (e ) = (c+d)
Tk.40,000
50,000
Tk.40,000
(4,900)
(184,900)
Tk.57,100
(4,900)
(4,900)
Tk.57,100
Question-02
Minden Company is a wholesale distributor of premium European chocolates. The
company’s balance sheet as of April 30 is given below:
Minden Company
Balance Sheet
April 30
Assets
Cash
Accounts receivable
Inventory
Buildings and equipment, net of depreciation
Total assets
Liabilities and Stockholders’ Equity
Accounts payable
Note payable
Common stock
Retained earnings
Total liabilities and stockholders’ equity
Tk.
Tk. 9,000
54,000
30,000
207,000
Tk. 300,000
Tk. 63,000
14,500
180,000
42,500
Tk.300,000
The company is in the process of preparing a budget for May and has assembled
the following data:
a. Sales are budgeted at $200,000 for May. Of these sales, $60,000 will be for
cash; the remainder will be credit sales. One-half of a month’s credit sales
are collected in the month the sales are made, and the remainder is collected
in the following month. All of the April 30 accounts receivable will be
collected in May.
b. Purchases of inventory are expected to total $120,000 during May. These
purchases will all be on account. Forty percent of all purchases are paid for
in the month of purchase; the remainder is paid in the following month. All
of the April 30 accounts payable to suppliers will be paid during May. c.
The May 31 inventory balance is budgeted at $40,000.
16
c. Selling and administrative expenses for May are budgeted at $72,000,
exclusive of depreciation. These expenses will be paid in cash. Depreciation
is budgeted at $2,000 for the month.
d. The note payable on the April 30 balance sheet will be paid during May,
with $100 in interest. (All of the interest relates to May.)
e. New refrigerating equipment costing $6,500 will be purchased for cash
during May. g. During May, the company will borrow $20,000 from its bank
by giving a new note payable to the bank for that amount. The new note will
be due in one year.
Required:
1 Prepare a cash budget for May. Support your budget with a schedule of
expected cash collections from sales and a schedule of expected cash
disbursements for merchandise purchases.
2 Prepare a budgeted income statement for May. Use the absorption costing
income statement format.
3 Prepare a budgeted balance sheet as of May 31.
Solution-02
Schedule of cash receipts:
Cash sales-May
Collections on account receivable
April 30 balance
May sales (50% X 140,000)
Total cash receipts
Tk.60,000
54,000
70,000
184,000
Schedule of expected cash disbursements:
April 30 Accounts payable balance
May purchases ( 40%XTk. 120,000)
Total cash payments
Tk. 63,000
48,000
Tk.111,000
17
Minden Company
Cash budget
For the month of May
Beginning cash balance
Add: collections from customers (above)
Total cash available (a)
Less cash disbursements:
Purchase of inventory (above)
Selling and administrative expenses
Purchase of equipment
Total cash disbursements (b)
Excess of cash available over disbursements (c )= (a+b)
Financing:
Borrowing-note
Repayments-note
Interest
Total Financing (d)
Ending cash balance (e ) =(c+d)
Tk. 9,000
184,000
193,000
111,000
72,000
6,500
189,500
3,500
20,000
(14,500)
(100)
5,400
Tk. 8,900
Minden Company
Budgeted Income Statement
For the month of May
Sales
Less: Cost of goods sold:
Beginning inventory
Add: purchase
Goods available for sale
Less: Ending inventory
Cost of goods sold
Gross Margin
Less: Selling and administrative
expenses
Net operating income
Less: Interest expense
Net income
18
Tk. 200,000
Tk. 30,000
120,000
150,000
40,000
110,000
90,000
74,000
16,000
100
15,900
Minden Company
Budgeted Balance Sheet
May 31
Assets
Cash
Accounts receivable(50%XTk.140,000)
Inventory
Building and equipment , net of depreciation (Tk.207,000+6,5002,000)
Total assets
Liabilities & Stockholders’ Equity
Accounts payable (60% X 120,000)
Notes payable
Common stock
Retained earnings (Tk.42,500+15,900)
Total liabilities & Stockholders’ equity
Tk.
8,900
70,000
40,000
211,500
Tk.330,400
72,000
20,000
180,000
58,400
Tk.330,400
(Lecture 4) Question-01
Minden Company is a wholesale distributor of premium European chocolates.
The company’s balance sheet as of April 30 is given below:
Minden Company
Balance Sheet
April 30
Assets
Cash
Accounts receivable
Inventory
Buildings and equipment, net of depreciation
Total assets
Liabilities and Stockholders’ Equity
Accounts payable
19
Tk.
Tk. 9,000
54,000
30,000
207,000
Tk. 300,000
Tk. 63,000
Note payable
14,500
Common stock
180,000
Retained earnings
42,500
Total liabilities and stockholders’ equity
Tk.300,000
The company is in the process of preparing a budget for May and has assembled
the following data:
a. Sales are budgeted at $200,000 for May. Of these sales, $60,000 will be for
cash; the remainder will be credit sales. One-half of a month’s credit sales
are collected in the month the sales are made, and the remainder is collected
in the following month. All of the April 30 accounts receivable will be
collected in May.
b. Purchases of inventory are expected to total $120,000 during May. These
purchases will all be on account. Forty percent of all purchases are paid for
in the month of purchase; the remainder is paid in the following month. All
of the April 30 accounts payable to suppliers will be paid during May.
c. The May 31 inventory balance is budgeted at $40,000.
d. Selling and administrative expenses for May are budgeted at $72,000,
exclusive of depreciation. These expenses will be paid in cash. Depreciation
is budgeted at $2,000 for the month.
e. The note payable on the April 30 balance sheet will be paid during May,
with $100 in interest. (All of the interest relates to May.)
f. New refrigerating equipment costing $6,500 will be purchased for cash
during May. g. During May, the company will borrow $20,000 from its bank
by giving a new note payable to the bank for that amount. The new note will
be due in one year.
Required:
1 Prepare a cash budget for May. Support your budget with a schedule of
expected cash collections from sales and a schedule of expected cash
disbursements for merchandise purchases.
2 Prepare a budgeted income statement for May. Use the absorption costing
income statement format.
3 Prepare a budgeted balance sheet as of May 31.
20
Solution-01
1. Schedule of cash receipts:
Cash sales-May
Collections on account receivable
April 30 balance
May sales (50% X 140,000)
Total cash receipts
Tk.60,000
54,000
70,000
184,000
2. Schedule of expected cash disbursements:
April 30 Accounts payable balance
May purchases ( 40%XTk. 120,000)
Total cash payments
Minden Company
Tk. 63,000
48,000
Tk.111,000
Cash budget
For the month of May
Beginning cash balance
Add: collections from customers (above)
Total cash available (a)
Less cash disbursements:
Purchase of inventory (above)
Selling and administrative expenses
Purchase of equipment
Total cash disbursements (b)
Excess of cash available over disbursements (c )= (a+b)
Financing:
Borrowing-note
Repayments-note
Interest
Total Financing (d)
Ending cash balance (e ) =(c+d)
21
Tk. 9,000
184,000
193,000
111,000
72,000
6,500
189,500
3,500
20,000
(14,500)
(100)
5,400
Tk. 8,900