March/ June '17

You will have to be a bit more specific as to which bit of the answer you are not clear about, because the examiners answer does show the workings in full.

You know the overdraft at the start of the month, and so you need to add and subtract the cash receipts and payments during the month in order to calculate the overdraft at the end of the month.

Since you know the receivables and payables at the start of the month, the purchases and sales during the month, and the payment policies, you are able to calculate the cash received from customers and the cash paid to suppliers in the same way as we prepare cash budgets. (Have you watched my free lecture on cash budgets?)

Because they are payments in January that will therefore increase the overdraft – the question wants to know what the overdraft will be at the end of January.