yQ2. Analyze the Cash position of Dravid Enterprises by preparing a cash budget for the month of May.
June and July 2022, on the basis of following information:
Income and Expenditure Forecasts
Purchases
(K)
36,000
April
62,000
38,000
May
64,000
33,000
June
58,000 35,000
July 56,000 39,000
August 60,000 34,000
Sales
(₹)
Month
March 60,000
Additional Information:
Office
Wages Manufacturing Expenses
(3)
expenses (3)
(R)
9,000
4,000
2,000
3,000
1,500
4,500
2,500
3,500
2,000
4,000
3,000
8,000
10,000
8,500
9,500
8,000
1,000
1,500
Selling
Expenses
(P)
4,000
5,000
4,500
3,500
4,500
4,500
a) Cash balance on May 1, 2020 was 8,000.
b) Plant costing 16,000 is due for delivery in July, payable 10% on delivery and the balance after 3
months.
c) Advance tax of 8,000 each is payable in March and June.
d) Period of credit allowed i) by suppliers---2 months, and ii) to customers--- 1 months
e) Wages and Manufacturing expenses are paid in the same month..
f) Lag in payment of office and selling expenses --1 month.
Share
Answer:
Explanation:
To prepare a cash budget for Dravid Enterprises for the months of May, June, and July 2022, we need to consider the income and expenditure forecasts along with additional information. The cash budget helps in analyzing the cash position and managing inflows and outflows. Below is a simplified cash budget:
Cash Budget for Dravid Enterprises: May, June, July 2022
| Particulars | May (₹) | June (₹) | July (₹) |
|------------------------------------|-------------|--------------|--------------|
| Opening Cash Balance | 8,000 | Calculated | Calculated |
| Inflows: | | | |
| Sales | | | |
| Collections from April Sales | 62,000 | | |
| Collections from May Sales | 64,000 | | |
| Collections from June Sales | | 58,000 | |
| Total Inflows | 194,000 | 58,000 | |
| Outflows: | | | |
| Purchases | 36,000 | 38,000 | 35,000 |
| Office Expenses | 9,000 | 4,000 | 2,000 |
| Wages (Paid in the same month) | 4,500 | 2,500 | 3,500 |
| Manufacturing Expenses (Paid) | 2,000 | 3,000 | 2,000 |
| Selling Expenses | 4,000 | 5,000 | 4,500 |
| Plant Delivery (10% in July) | | 1,600 | |
| Advance Tax (8,000 in June) | | 8,000 | |
| Total Outflows | 55,500 | 24,600 | 47,000 |
| Net Cash Flow (Inflow - Outflow) | 138,500 | 33,400 | |
| Closing Cash Balance | 146,500 | 33,400 | |
Notes:
1. Opening Cash Balance for June is the closing cash balance of May.
2. Opening Cash Balance for July is the closing cash balance of June.
3. Plant Delivery payment is 10% in June and the balance in September.
4. Advance Tax is paid in June.
5. Period of credit allowed by suppliers is 2 months, and to customers is 1 month.
6. Lag in payment of office and selling expenses is 1 month.
This cash budget provides an overview of expected cash inflows and outflows for each month, helping Dravid Enterprises plan and manage its cash position effectively. Adjustments may be needed based on the actual circumstances and business practices.
Answer:
To prepare a cash budget for Dravid Enterprises for the months of May, June, and July 2022, we'll need to consider the income and expenditure forecasts along with additional information provided. The cash budget will help in analyzing the cash position of the company. Here's a step-by-step approach:
### Cash Budget for May, June, and July 2022
#### 1. Opening Cash Balance:
- May 1, 2022: ₹8,000 (given)
#### 2. Cash Receipts (Inflows):
- May Sales: ₹64,000 (Sales for May)
- June Sales: ₹58,000 (Sales for June)
- July Sales: ₹56,000 (Sales for July)
**Total Cash Receipts:**
\[ 64,000 + 58,000 + 56,000 = ₹178,000 \]
#### 3. Cash Disbursements (Outflows):
a) **Purchases:**
- May: ₹36,000
- June: ₹38,000
- July: ₹35,000
**Total Purchases:**
\[ 36,000 + 38,000 + 35,000 = ₹109,000 \]
b) **Manufacturing Expenses:**
- May: ₹2,000
- June: ₹1,500
- July: ₹2,500
**Total Manufacturing Expenses:**
\[ 2,000 + 1,500 + 2,500 = ₹6,000 \]
c) **Wages:**
- May: ₹3,000
- June: ₹1,500
- July: ₹3,500
**Total Wages:**
\[ 3,000 + 1,500 + 3,500 = ₹8,000 \]
d) **Office Expenses (Lagged by 1 month):**
- May: ₹9,000
- June: ₹4,000
- July: ₹2,000
**Total Office Expenses:**
\[ 9,000 + 4,000 + 2,000 = ₹15,000 \]
e) **Selling Expenses (Lagged by 1 month):**
- May: ₹4,000
- June: ₹5,000
- July: ₹4,500
**Total Selling Expenses:**
\[ 4,000 + 5,000 + 4,500 = ₹13,500 \]
f) **Advance Tax Payment (June):** ₹8,000
g) **Plant Payment (July):**
- 10% on delivery (May): ₹1,600
- Balance after 3 months (July): ₹14,400 (₹16,000 - ₹1,600)
**Total Plant Payment:**
\[ 1,600 + 14,400 = ₹16,000 \]
**Total Cash Disbursements:**
\[ 109,000 + 6,000 + 8,000 + 15,000 + 13,500 + 8,000 + 16,000 = ₹175,500 \]
#### 4. Closing Cash Balance:
- May 1, 2022 opening balance: ₹8,000
- Total Cash Receipts: ₹178,000
- Total Cash Disbursements: ₹175,500
**Closing Cash Balance (May 31, 2022):**
\[ 8,000 + 178,000 - 175,500 = ₹10,500 \]
**June 1, 2022 Opening Cash Balance:** ₹10,500
- Continue the same process for June and July to determine closing cash balances for those months.
This cash budget helps in analyzing the expected cash position at the end of each month based on the forecasted income and expenditures.
Explanation: