F2 bpp kit cash flows

HM Co commenced business on 1 October 20X2, All sales are on credit.

More favourable credit terms are offered to larger customers (class A) than to smaller customers (class B). All sales are invoiced at the end of the month in which the sale occurs. Class A customers will be given credit terms requiring payment within 60 days of invoicing, while class B customers will be required to pay within 30 days of invoicing.

Since it is recognised, however, that not all customers comply with the credit terms they are allowed, receipts from customers have prudently been estimated as follows:

Customer type
30days. 31-60 61-90 91-120 bad
debts

Class A 50%. 30%. 15%. 5%
Class B. 60%. 25%. 10%. 5%

The above table shows that customers are expected either to pay within 60days of the end of the credit period, or not at all. Bad debts will therefore be written off 60days after the end of the credit period.

Sir we have to find budgeted cash inflows of 3 months nov, dec and jan based upon the prudently estimated receipts

All months are assumed to be of 30 days, i solved the entire question, except the only thing which is bothering me is that aren’t we going to calc 5% of bad debts sir? Because it says if customers don’t pay within 60 days, so after 60 days bad debts is going to be written off, we got credit sales of each class of customer in the first 4 months, I’m not writing that to not make the question further long but sir from october sales going to be received in jan for class a customers that’s 61-90 days 5% should be charged and for class b as well for oct sales received in jan

Please could you sort it out sir, why aren’t we using bad debts? Or is it because it asks for budgeted cash inflows not actual, since bad debts occur only after the actual sales

Okay sir i got that, but the 95% we are receiving aren’t we going to count that? Or because bad debt is being written off so we aren’t going to count that as well?

Yes sir so we should count 95% after the credit period of 60 days, because it says after 60 days bad debts is going to be written off, so 5% is not being paid, the rest 95% which will be paid should be counted? But in this they are not counting that 95%

Oh mybad sir i got it now, thankyou!