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Budget Preparation

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Budget Preparation

  • This topic has 3 replies, 2 voices, and was last updated 3 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • June 26, 2022 at 4:45 pm #659349
    Sukuna
    Participant
    • Topics: 25
    • Replies: 37
    • ☆☆

    A company has a two-month receivables cycle. It receives in cash 45% of the total gross
    sales value in the month of invoicing. Irrecoverable debts are 20% of total gross sales value
    and there is a 10% discount for settling accounts within 30 days.

    What proportion of the first month’s sales will be received as cash in the second month?

    My answer:

    Cash receipt in month of sale is = 45$
    Irrecoverable debt is = 20$

    And the rest of the sales must be 35%.

    But the answer is 30%. And I don’t understand why.

    Thanks in advance

    June 27, 2022 at 7:34 am #659375
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    The cash received in the month of invoicing will be after getting a 10% discount.

    Given that the cash received is 45% of the sales, the invoices for which the payment is received must be 45 / 90% = 50% of the sales.
    (For every $100 invoiced, $50 of the invoices are paid within one month but because of the discount only $45 cash is received.)

    Therefore 50% of the sales are paid in 1 months, 20% are irrecoverable, leaving 30% paid in the second month.

    June 28, 2022 at 9:17 am #659477
    Sukuna
    Participant
    • Topics: 25
    • Replies: 37
    • ☆☆

    Now I get it. Thank you

    June 28, 2022 at 3:31 pm #659489
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
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