A budget is a forecast of future events

A cash budget is a detailed plan of a firms future

cash flows
4 major parts in a cash budget:
Cash receipts
Cash disbursement
Net change in cash
New financing needed
Indicate the amount and timing of a firms needs for
future financing
Provide the basis for taking corrective action in the
event of variances
Provide the basis for performance evaluation and
control
No fixed time limit in budget period
Good budget period is the period that can illustrate
the effects of management policies and provide
accurate estimation
You are required to prepare a cash budget for the Cookie Bhd for the month
of July, August and September 2012.
The amount of sales on June is RM120,000
The projected sales for the month of July, August and September are
RM130,000, RM160,000 and RM140,000 respectively
The company has observed that 75% of its sales are for cash and 25% of
its sales are collected in the following month
Purchases are 60% of the monthly sales and paid in cash
Rent are RM10,000 per month and general administrative expenses are
RM20,000 per month
The company plan to give bonus of RM50,000 in October, 2012
Tax repayment of RM25,000 are made in July, 2012
The interest on the accumulated loan is 11% per annum
The beginning balance on July, 2012 is RM1,000 and the company must
maintain a minimum cash balance of RM6,000 each month
July Aug Sept
Sales: 120,000 (June) 130,000 160,000 140,000
75% pay in cash 97,500 120,000 105,000
25% pay 1 month later 30,000 32,500 40,000
127,500 152,500 145,000
Purchases (60% x sales): 78,000 96,000 84,000
100% pay in cash 78,000 96,000 84,000
TOTAL CASH RECEIPTS: 127,500 152,500 145,000
July Aug Sept
Cash Disbursements:
Purchases payment (78,000) (96,000) (84,000)
Rent (10,000) (10,000) (10,000)
General administration expenses (20,000) (20,000) (20,000)
Tax (25,000) - -
TOTAL CASH DISBURSEMENTS (133,000) (126,000) (114,000)
NET CHANGE IN CASH (5,500) 26,500 31,000
Beginning balance 1,000 6,000 21,904
Interest (11% p.a.) 0 (96)** 0
Additional financing 10,500* 0 0
Financing repayment 0 (10,500) 0
Ending balance 6,000 21,904 52,904
Accumulated loan 10,500 0 0
*Additional financing = minimum cash balance + net
change in cash beginning
balance
= 6,000 + 5,500 1,000
= 10,500

** Interest = (11% x accumulated loan)/ 12
= 96
The followings are the projected sales and purchases of TT Bhd for the month
of March, April and May of 2009.
Sales Purchases
MARCH RM200,000 RM150,000
APRIL RM155,000 RM130,000
MAY RM170,000 RM140,000
The amount of sales and purchase on February is RM150,000 and RM130,000
respectively
The monthly sales and purchases are paid in the following month
The company pays RM10,000 per month for wages and RM4,000 each month
for administrative expenses
Depreciation expenses is RM5,000 per month
Tax repayment of RM9,000 are made in March
The cash balance on February was RM6,000 and the minimum balance the
company wants to maintain is RM9,000 each month
Interest on accumulated loan is 12% per annum





March April May
Sales: 150,000 (Feb) 200,000 155,000 170,000
100% pay 1 month later 150,000 200,000 155,000
Purchases: 130,000 (Feb) 150,000 130,000 140,000
100% pay 1 month later 130,000 150,000 130,000
TOTAL CASH RECEIPTS: 150,000 200,000 155,000
Cash Disbursements:
Purchases payment 130,000 150,000 130,000
Wages 10,000 10,000 10,000
Administration expenses 4,000 4,000 4,000
Tax 9,000 - -
TOTAL CASH DISBURSEMENTS (153,000) (164,000) (144,000)
March April May
NET CHANGE IN CASH (3,000) 36,000 11,000
Beginning balance 6,000 9,000 38,940
Interest (12% p.a.) 0 (60)** 0
Additional financing 6,000* 0 0
Financing repayment 0 (6,000) 0
Ending balance 9,000 38,940 49,940
Accumulated loan 6,000 0 0
*Additional financing = minimum cash balance + net
change in cash beginning
balance
= 9,000 + 3,000 6,000
= 6,000

** Interest = (12% x accumulated loan)/ 12
= 60