FINANCIAL PRACTICES FRSR1063 A CASH BUDGET REPORT OF WEEKS 1 TO 6 FOR BATC BATC CASH BUDGET FOR WEEKS 1 TO 6 WEEK 1 2 3 4 5 6 Beginning cash balance Add

FINANCIAL PRACTICES
FRSR1063

A CASH BUDGET REPORT
OF WEEKS 1 TO 6
FOR BATC
BATC
CASH BUDGET FOR WEEKS 1 TO 6
WEEK
1 2 3 4 5 6
Beginning cash balance
Add:
Cash Receipts (a) RM
1,000
24,000 RM
700
24,000 RM
(3,500)
28,200 RM
9,100
25,800 RM
28,100
19,800 RM
41,100
5,400
Total available cash (b) 25,000 24,700 24,700 34,900 47,900 46,500
Less:
Direct Materials
Direct Wages
Variable Overheads
Fixed Overheads 8,000
3,200
4,800
8,300 12,500
4,200
3,200
8,300 6,000
2,800
Nil
6,800 Nil
Nil
Nil
6,800 Nil
Nil
Nil
6,800 Nil
Nil
Nil
6,800
Total Payments (c) 24,300 28,200 15,600 6,800 6,800 6,800
Excess/Deficiency of Available Cash Over Cash Disbursement
(a – c) (300) (4,200) 12,600 19,000 13,000 (1,400)
Ending Cash Balance
(b – c) 700 (3,500) 9,100 28,100 41,100 39,700
RECEIPTS
BATC
SCHEDULE OF EXPECTED CASH COLLECTIONS FROM CUSTOMERS
FOR WEEKS 1 TO 6

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SALES RM WEEK
1 2 3 4 5 6
Beginning Account Receivable RM
24,000a RM
7,200b RM RM RM RM
WEEK 1 24,000 16,800c 7,200d WEEK 2 30,000 21,000 9,000 WEEK 3 24,000 16,800 7,200 WEEK 4 18,000 12,600 5,400
WEEK 5 NIL NIL
WEEK 6 NIL Total Collections 24,000 24,000 28,200 25,800 19,800 5,400
* All Sales on CREDIT
a = Balance owning from debtors RM 31,200 (RM24,000 received on 1st week)
b = Reminder received during 2nd week (RM31,200 – RM24,000)
c = 70% x Sales received at the end of the 1st week after the sales have been made
d =30% x Sales received at the end of the next week
BATC
Sales Budget for Weeks 1 to 6
WEEK
1 2 3 4 5 6
Sales Units 400 500 400 300 NIL NIL
× Price per Unit RM60 RM60 RM60 RM60 – –
Total Sales RM24,000 RM30,000 RM24,000 RM18,000 NIL NIL
* SALES IN WEEK 4 :
=>OPENING STOCK + PRODUCTION IN WEEK 1 & 2 – SALES IN WEEK 1 TO 3
=>600 UNITS + (600 + 400) – (400 + 500 + 400)
=>1600 UNITS – 1300 UNITS
=>300 UNITS
PAYMENTS
BATC
SCHEDULE OF EXPECTED PAYMENTS FOR DIRECT MATERIALS
FOR WEEKS 1 TO 6
PURCHASED RM15 per unit WEEK
1 2 3 4 5 6
ACCOUNT PAYABLE RM
8,000 RM RM RM RM RM
WEEK 1 12,500 12,500 WEEK 2 6,000 6,000 WEEK 3 NIL NIL WEEK 4 NIL NIL WEEK 5 NIL NIL
WEEK 6 NIL TOTAL DIRECT MATERIALS PAYMENTS 8,000 12,500 6,000 NIL NIL NIL
* PURCHASED IN WEEK 1
=>(RM15 X 600 UNITS) + INCREASE IN STOCK
=>RM9000 + (RM11,000 – RM7,500)
=>RM12,500
*ALL MATERIALS PURCHASED ARE PAID ONE WEEK AFTER RECEIVED

BATC
SCHEDULE OF EXPECTED PAYMENTS FOR DIRECT WAGES
FOR WEEKS 1 TO 6
WEEK
1
RM 2
RM 3
RM 4
RM 5
RM 6
RM
Beginning Account payable
Week 1
= RM7 x 600 units
Week 2
= RM7 x 400 units
Week 3 = Nil
Week 4 = Nil
Week 5 = Nil
Week 6 = Nil 3,200 4,200 2,800 NIL NIL NIL
TOTAL WAGES PAYMENTS 3,200 4,200 2,800 NIL NIL NIL
* ALL DIRECT WAGES ARE PAID IN ONE WEEK ARREARS
* DURING PERIOD OF STRIKE, DIRECT WAGES WOULD NOT BE INCURRED

BATC
SCHEDULE OF EXPECTED PAYMENTS FOR VARIABLE OVERHEAD
FOR WEEKS 1 TO 6
WEEK
1
RM 2
RM 3
RM 4
RM 5
RM 6
RM
WEEK 1
= 600 UNITS X RM 8
WEEK 2
= 400 UNITS X RM 8
WEEK 3 = NIL
WEEK 4 = NIL
WEEK 5 = NIL
WEEK 6 = NIL 4,800 3,200 NIL NIL NIL NIL
TOTALL VARIABLE OVERHEAD PAYMENTS 4,800 3,200 NIL NIL NIL NIL
* ALL RELEVANT OVERHEAD ARE PAID IMMEDIATELY
BATC
SCHEDULE OF EXPECTED PAYMENTS FOR FIXED OVERHEAD
FOR THE WEEKS 1 TO 6
WEEK
1
RM 2
RM 3
RM 4
RM 5
RM 6
RM
Budgeted Fixed Overhead
Less:
Depreciation of equipment 9,000
700 9,000
700 9,000
700 9,000
700 9,000
700 9,000
700
Normal Payment 8,300 8,300 8,300 8,300 8,300 8,300
Cash expended reduced during strike 1,500 1,500 1,500 1,500
Total Fixed Overhead payments 8,300 8,300 6,800 6,800 6,800 6,800
*ALL RELEVANT OVERHEAD ARE PAID IMMEDIATELY
B)Comment
i.)From the Cash Budget Report, we can see in Week 2 the finance will meet a deficit ii.)After Week 6, there are no more cash receipts as there are no more sales been made as the stock of finished goods are completely finish.

iii.)Starting from week 3, cash out flow of RM6,800 for fixed overhead still to be paid even though the production are stop.

C)The reason why the reported profit figure for a period does not normally represent the amount of cash generated in that period:
Profit and Cash-flow (Cash generated) are related financial measurement in accounting, but they are not directly linked. Profit is a measure of the company’s on-going sustainability, while Cash-flow is a measure of the company’s ability to pay it bills as they become due.

The Cash-flow for a particular period is the closing cash balance arrived at after deducting the cash-out (payments) from the cash-in (receipts)

Profit on the other hand, is the amount that remains after deducting from the revenue earned, the expenses incurred in earning that revenue.

Example:
=> Profit for the period
= Revenue (RM1000 Total Sales) Less Expenses (RM500)
= (+ve) RM500 Profit
=> Cash-Flow for the period
= Cash-in (RM500 Cash Sales) Less Cash-out (RM1000 Cash paid)
= (-ve) RM500 Cash-flow

This discrepancy in the measures between profit and cash-flow is caused primarily by timing differences.

D)Conclusion and Recommendations:

Financial plans are drawn up so that a minimum balance of cash will be available at all times. The amount to be held will depend on estimated future cash flows. In general, the cash balance should be large enough to enable the company meet its payrolls and pay its operating costs for the next week. By holding adequate cash balances, management can cope with small adversities and will not be forced to borrow under unfavourable conditions.
During the strike, there will be a reserve to draw upon. While the reserve is being used, management can make alternate plans and can secure additional cash from other sources to meet future needs.

The recommendations can be offers are:
In Week 1, the budgeting purchased of material can be made lower, so it would reduce the cash-outflows to be paid for the material in Week 2.

The ending of cash balance of RM39,700 on Week 6 can be used as reserve to pay the cash out-flows for a further more week until the reopening due to strike.

The sales on credit basis can be collected into cash. The time required to pay the outstanding accounts from debtors will have to be estimated.

The excess of cash on Week 3 to Week 5 should be invested on a short term basis.

REFERENCE
http://accountingexplained.com/managerial/master-budget/cash-budgethttp://www.accountingtools.com/cash-budgethttp://www.investopedia.com>ask>answershttp://www.quora.comhttp://www.va-interactive.com>ibt>cash_bud Prepare a Cash BudgetFINANCIAL MANAGEMENT Second Edition OXFORD

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