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Cash Reciepts

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA MA – FIA FMA › Cash Reciepts

  • This topic has 1 reply, 2 voices, and was last updated 6 years ago by John Moffat.
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  • Author
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  • October 12, 2018 at 3:15 pm #477552
    mango1991
    Member
    • Topics: 11
    • Replies: 15
    • ☆

    A company has the following budgeted sales figures –
    Month 1 – $90000
    Month 2 – $105000
    Month 3 – $120000
    Month 4 – $108000

    80% of the sales are on credit and the remainder are paid in cash. Credit customers paying in the month after sale are given a discount of 1.5%. Credit customers normally pay within the following time frame.

    1 month after the sales – 40% of the credit sales
    2 months after the sale – 70% of the credit sales
    3 months after the sale – 98% of credit sales.

    There is an exception that 2% of credit sales will become irrecoverable debts.
    Calculate the total receipts expected in month 4.

    Sir for this question i am mainly confused for Month 1 sale and Month 2.

    October 13, 2018 at 11:30 am #477760
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54662
    • ☆☆☆☆☆

    1 month after sale they receive 40% of the credit sales. 2 months after sale they must receive another 30% (so as to have 70% in total), and 3 months after sale they must receive another 28% (so as to have 98% in total).

    Therefore for the credit sales in month 1, 40% is received in month 2, 30% is received in month 3, and 28% is received in month 4.
    The same pattern is repeated for each following month.

    So…..in month 4, they will get cash sales of 20% of month 4 sales.
    In addition they will receive 28% of month 1’s credit sales; 30% of month 2’s credit sales; and 40% of month 3’s credit sales.

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