Page 199 - DMGT403_ACCOUNTING_FOR_MANAGERS

Accounting for Managers

Notes Cash payment are as follows:
Figure 9.7

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 Office 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.
2. Delay in the payment of wages and office expenses is only one month. It means wages and
office expenses of Feb. month are paid in the next month, March.

Selling expenses from the above coloured boxes, it is obviously understood that during
the months of April, May and June; the following will be stream of payment of selling
expenses.

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