ABC Company Ltd gives the following particulars. You are required to prepare a cash budget for the three months ending on 31 December 1997.

Months Sales

(Rs)

Materials

(Rs)

Wages

(Rs)

Overheads

(Rs)

August 20,000 10,200 3,800 1,900 September 21,000 10,000 3,800 2,100 October 23,000 9,800 4,000 2,300 November 25,000 10,000 4,200 2,400 December 30,000 10,800 4,500 2,500

b. Credit terms are as follows:

Sales/debtors: 10% sales are on cash basis, 50% of the credit sales are collected next month and the balance is collected in the following month:

Creditors — Materials, 2 months

— Wages, 1/5 month

— Overheads, 1/2 month

c. Cash balance on 1 October 1997 is expected to be Rs 8,000.

d. A machinery will be installed in August 1997 at a cost of Rs 1,00,000. The monthly instalment of Rs 5,000 is payable from October onwards.

e. Dividend at 10% on the preference share capital of Rs 3,00,000 will be paid on 1 December 1997.
f . Advance to be received for sale of vehicle is Rs 20,000 in December.
g. Income tax (advance) to be paid in December is Rs 5,000.