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Hi John,
I am not sure if I am missing something here.. but please help.
Sales credit 240,000
expected increase in inventory 20,000
expected decrease in trade receivables 12,000Calculate the budgeted receipt from trade receivables next month.
So we have made 240,000 sales on credit, so we have a DR receivable balance, and we are expecting a decrease in receivables, so wouldn’t out receivable balance decrease by 12,000?
I don’t understand why the answer is =+252,000 (240+12) Is trade receivable not decreasing? So am i not right to assume receivables have fallen by 12,000? Wont a reduction in receivables reduce overall receivable balance?
What am I missing?
You don’t know what the opening receivables were.
Since we made sales of 240,000, then if we had received cash of 240,000 the receivables balance would stay unchanged.
Since the receivables balance fell by 12,000 then we must have received even more cash – a total of 252,000.
(I don’t know where you found this question, but it is not really a Paper F9 type question 🙂 )
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