March 30, 2015 at 12:10 pm #239526shreyasParticipant
Q.) You might be given a cash flow forecast question in which you are required to analyse an opening statement of financial position to decide how many outstanding accounts receivable will pay what they owe in the first few months of the cash flow forecast period, and how many outstanding accounts payable must be paid.
Suppose that a statement of financial position as at 31 dec 2014 shows accounts receivable of $150,000 and trade accounts payable of $60,000.The following information is relevant.
*1 and half months credit is taken from trade accounts payable
*Sales and material purchases were both made at even monthly rate
Lets try to ascertain the month 2015 in which the accounts receivable will eventually pay and the accounts payable will be paid.
(B) Since accounts payable are paid after one and half months, the statement of financial position accounts payable will be paid in jan and the first half of feb 2015, which means that flow forecasted payments will be as follows.
In jan (purchases in 2nd half of nov and 1st half of dec 2014) $40,000
In feb (purchases in 2nd half of dec 2014) $20,000
Total accounts payable in the statement of financial position 60,000
(the accounts payable of $60,000 represent 1 and half months purchases, so that purchases in 2014 must be $40,000 per month, which is $20,000 per half month)
March 30, 2015 at 12:13 pm #239527shreyasParticipant
sir i didnt understand the purchase calculation.It is said that he has taken one and half months credit from account payable. So payment in jan the purchase has to be done in 2nd half of nov til the end of dec rite sir? i did not understand this concept 🙁
March 30, 2015 at 2:52 pm #239546John MoffatKeymaster
I really don’t think such a sill question would be asked in the exam.
However the logic of the answer is that purchases during (for example) January will be spread throughout the month. So those early in the month will be paid during February, but this late in the month will be paid for in March.
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