JL is preparing its cash budget for the next three quarters. The following data have been extracted from the operational budgets: Sales revenue Quarter 1 OMR 500,000 Quarter 2 OMR 450,000 Quarter 3 OMR 480,000 Direct material purchases Quarter 1 OMR 138,000 Quarter 2 OMR 151,200 Quarter 3 OMR 115,600 Additional information is available as follows: JL sells 20% of its goods for cash. Of the remaining sales value, 70% is received within the same quarter as sale and 30% is received in the following quarter. It is estimated that trade receivables will be OMR 125,000 at the beginning of Quarter 1. No bad debts are anticipated. 50% of payments for direct material purchases are made in the quarter of purchase, with the remaining 50% in the quarter following purchase. It is estimated that the amount owing for direct material purchases will be OMR 60,000 at the beginning of Quarter 1. JL pays labour and overhead costs when they are incurred. It has been estimated that labour and overhead costs in total will be OMR 303,600 per quarter. This figure includes depreciation of OMR 19,600. JL expects to repay a loan of OMR 100,000 in Quarter 3. The cash balance at the beginning of Quarter 1 is estimated to be OMR 49,400 positive. You are required to calculate:- Prepare a cash budget for each of the THREE quarters.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
JL is preparing its
Sales revenue
Quarter 1 OMR 500,000
Quarter 2 OMR 450,000
Quarter 3 OMR 480,000
Direct material purchases
Quarter 1 OMR 138,000
Quarter 2 OMR 151,200
Quarter 3 OMR 115,600
Additional information is available as follows:
- JL sells 20% of its goods for cash. Of the remaining sales value, 70% is received within the same quarter as sale and 30% is received in the following quarter. It is estimated that trade receivables will be OMR 125,000 at the beginning of Quarter 1. No
bad debts are anticipated.
- 50% of payments for direct material purchases are made in the quarter of purchase, with the remaining 50% in the quarter following purchase. It is estimated that the amount owing for direct material purchases will be OMR 60,000 at the beginning of Quarter 1.
- JL pays labour and overhead costs when they are incurred. It has been estimated that labour and overhead costs in total will be OMR 303,600 per quarter. This figure includes depreciation of OMR 19,600.
- JL expects to repay a loan of OMR 100,000 in Quarter 3.
- The cash balance at the beginning of Quarter 1 is estimated to be OMR 49,400 positive.
You are required to calculate:-
Prepare a cash budget for each of the THREE quarters.
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