Wivenhoe Wines is based in the Brisbane Valley and makes boutique wines sold online to customers on credit (70% of sales)

and to customers visiting the vineyard and purchasing bottles of wine at the cellar door for cash (30% of sales). Wivenhoe Wines is preparing a sales budget for the October–December quarter. Sales are estimated at 100 bottles in October, 200 bottles in November and 350 bottles in December. The average selling price per bottle is $30. Credit customers pay 95 per cent in the month after sale. The remaining credit sales are bad debts. September sales were 220 bottles.

Required:

a Prepare the Sales Budget and a schedule of cash collections for the October–December quarter (each month and quarter total).

b Explain why bad debts are not included in the cash collections. Would these appear in any other financial report?