A M. Lamb is going to set up a new business on 1 April 2014. She estimates that her first six months in business will be as follows:

(i) She will put $£ 60,000$ into a bank account for the business on 1 April 2014 .

(ii) On 1 April 2014, she will buy machinery for $£ 8,000$, a motor van for $£ 6,400$ and premises for $£ 35,000$, paying for them immediately out of the business bank account.

(iii) All purchases will be on credit. She will buy $£ 10,000$ of goods on 1 April and will pay for these in May. She will purchase another $£ 12,000$ of goods in April and $£ 16,000$ of goods each month during May, June, July, August, and September. Other than the first $£ 10,000$ purchase in April, all other purchases will be paid for two months after purchase.

(iv) Sales (all on credit) will be $£ 26,000$ for April and $£ 28,000$ for each month after that. Debtors will pay for the goods in the second month after purchase.

(v) Inventory on 30 September 2014 will be $£ 8,000$.

(vi) Wages and salaries will be $£ 2,100$ per month and will be paid on the last day of each month.

(vii) General expenses will be $£ 200$ per month, payable in the month following that in which they were incurred.

(viii) She has an endowment assurance policy maturing on 15 July 2014. She will receive $£ 17,500$ on that date and it will be paid into the business bank account immediately.

(ix) Insurance covering the 12 months to 31 March 2015 will be paid by cheque on 30 September 2014, $£ 560$.

(x) Business rates will be paid as follows: for the three months to 30 June 2014 by cheque on 31 May 2014: for the 12 months ended 30 June 2015 by cheque on 31 October 2014. Business rates are $£ 1,440$ per annum.

(xi) She will make drawings of $£ 1,800$ per month by cheque.

(xii) She has substantial investments in public companies. Her bank manager will give her any overdraft that she may require.

(xiii) Depreciate premises $5 \%$ per annum, van $25 \%$ per annum, and machinery $20 \%$ per annum, all using the straight line method.

\section*{You are required to:}

(a) Draft a cash budget (includes bank) month by month showing clearly the amount of bank balance or overdraft at the end of each month.

(b) Draft the projected income statement for the first six months' trading, and a statement of financial position as at 30 September 2014.