ACCA MA · Guided practice (Show me how)
Chapter 16: Budgeting
Nordvik Trading - a three month cash budget
You are presented with the following forecast data for Nordvik Trading for the period November 20X1 to March 20X2. It has been taken from functional budgets that have already been prepared.
| Nov X1 | Dec X1 | Jan X2 | Feb X2 | Mar X2 | |
|---|---|---|---|---|---|
| $ | $ | $ | $ | $ | |
| Sales | 80,000 | 100,000 | 110,000 | 130,000 | 140,000 |
| Purchases | 40,000 | 60,000 | 80,000 | 90,000 | 110,000 |
| Wages | 10,000 | 12,000 | 16,000 | 20,000 | 24,000 |
| Overheads | 10,000 | 10,000 | 15,000 | 15,000 | 15,000 |
You are also told the following.
- Sales are 40% cash and 60% credit. Credit sales are paid two months after the month of sale.
- Purchases are paid the month following purchase.
- 75% of wages are paid in the current month and 25% the following month.
- Overheads are paid the month after they are incurred.
- The opening cash balance at 1 January 20X2 is $15,000.
Prepare a cash budget for the three month period January to March 20X2.
(a) Cash receipts
Calculate Nordvik Trading's receipts from cash sales and from credit sales, and its total cash receipts, for each of January, February and March 20X2.
(b) Cash payments, and the balance
Prepare the payments section of Nordvik Trading's cash budget for January to March 20X2, showing the wages paid, the total payments, the net cash flow and the cash balances brought forward and carried forward for each month.
Opening this exercise…