Carsons is a retail store that has given the task of preparing its budget for next year to a trainee accountant. The budget is prepared in quarters. Table 16.15 is the profit budget report produced by the trainee.

A cash forecast has also been prepared (see Table 16.16).

What are the questions you would want to ask the trainee accountant in order to satisfy yourself that the budget was realistic and achievable? Can you identify any errors that have been made in the budget or cash forecast? If so, make any corrections that you think are necessary and comment on any problems you have identified.

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Table 16.15 Carsons Stores Ltd. In '000 Sales Cost of sales Gross profit Expenses: Quarter 1 Quarter 2 Quarter 3 Quarter 4 Year total 100 40 110 110 120 440 44 44 48 176 60 66 66 72 264 Salaries 10 Rent 20 20 55 10 10 10 20 Depreciation 5 5 5 Promotional expenses 10 11 11 Administration expenses 5 5 5 02525 40 80 20 12 44 20 Total expenses 50 51 51 52 204 Net profit 10 15 15 20 60