Problem no.12.

5 of Khan &Jain

The following expected information are related to XYZ company ltd by quarters next
year, (in thousand of Rs.)

Particulars Q1 Q2 Q3 Q4

Sales 7,500 10,500 18,000 10,500

Cash payment:
Production cost 7,000 10,000 8,000 8,500
Selling & admin cost 1,000 2,000 2,900 1,600
Purchase of plant & other
Fixed assets 100 1,100 2,100 2,100

The debtors at the end of the quarter are 1/3 of sales for the quarter. The opening
balance of the debtors is Rs. 3,000,000. Cash on hand at the beginning of the year is
Rs. 650,000 and the desired minimum balance is Rs. 500,000. Borrowings are made
at the beginning of the quarters in which the need will occur in multiple of Rs. 10,000
and are prepaid at the end of the quarters. Interest charges may be ignored.

Required:
Prepare Cash budget (Quarter wise, in total)
The amount of loan outstanding at the end of the year
Problem no.12.6 of Khan & Jain

The following data pertain to a shop. The owner has made the following sales forecast
for the first 5 months of the coming year

January Rs. 40,000

February Rs. 45,000
March Rs. 55,000
April Rs. 60,000
May Rs. 50,000

Other data are as follows:

a) Debtors and creditors balance for the year are Rs. 30,000 and Rs. 14,000
respectively. The balance of other relevant assets and liabilities are:
Cash balance Rs. 7,500
Stock Rs. 51,000
Accrued sales commission Rs. 3,500

b) 40% sales are on cash basis. Credit sales are collected in the month
following sales
c) Cost of Sales is 60% of sales.
d) The only variable cost is a 5% commission to sales agents. The sales
commission is paid in the month after it is earned.
e) Inventory is kept equal to sales requirement for the next two month’s
budgeted sales.
f) Trade creditors are paid in the following month after purchases.
g) Fixed costs are Rs. 5,000 per month, including Rs. 2,000 depreciation.

Required:
Prepare a cash budget for the first three months of coming year.
Problem no.12.7 of Khan & Jain

The following information of ABC Company, prepare cash budget for the month of
April.

1. The firm makes 20% cash sales. Credit sales are collected 40%, 30% and 25%
in the month of sales, month after and second month after sales, respectively.
The remaining 5% become bad debts.

2. The firm has a policy of buying enough goods to maintain its inventory at 2.5
times the following month’s budgeted sales.

3. The firm is entitled to 2% discount on all purchases, if the bills are paid within
15 days and the firm avails such discount. Monthly purchases are made in two
lots on fortnightly basis.

4. Cost of goods sold, without considering 2% discount, is 50% of the selling

price. The firm records the inventory at net of discount.

5. Other data are:

Sales:
January Rs. 100,000
February Rs. 120,000
March Rs. 150,000
April Rs. 170,000
May Rs. 140,000

Inventory on March 31, Rs. 225,000

Cash on March 31, Rs. 30,000
Gross purchases Rs. 100,000
Selling, administrative expenses for April Rs. 45,000 (including Rs. 10,000
depreciation.