Page 155 - DMGT202_COST_AND_MANAGEMENT_ACCOUNTING

Cost and Management Accounting

Notes Figure 8.4: Classification of Cash Receipts

Cash Receipt

Sale Debtors Bills receivable Dividends Sale of Investments

Other Incomes

Cash payments are as follows:

Figure 8.5: Classification of Cash Payments
Cash Payments

Purchase of Assets Materials bought Salary paid

Rent paid Other payments

Example: From the estimates of income and expenditure, prepare cash budget for the
months from April to June.
Month Sales Purchases Wages Offi ce Exp. Selling Exp.
(`) (`) (`) (`) (`)
Feb. 1,20,000 80,000 8,000 5,000 3,600
Mar. 1,24,000 76,000 8,400 5,600 4,000
Apr. 1,30,000 78,000 8,800 5,400 4,400
May 1,22,000 72,000 9,000 5,600 4,200
June 1,20,000 76,000 9,000 5,200 3,800
1. Plant worth ` 20,000 purchase in June 25% payable immediately and the remaining in two
equal instalments in the subsequent months.
2. Advance payment of tax payable in Jan. and April ` 6,000
3. Period of credit allowed:

(a) By suppliers 2 months
(b) To customers 1 month
4. Dividend payable ` 10,000 in the month of June.

5. Delay in payment of wages and office expenses 1 month and selling expenses ½ month.
Expected cash balance on 1st April is ` 40,000.
Solution:
1. Plant worth ` 20,000 purchased, payable immediately is 25% i.e. ` 5,000 should be paid
in the month of June. The remaining cost of the machine has to be paid in the subsequent
months, after June. The payments whatever are expected to make after June is not relevant
as far as the budget preparation concerned.

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