Glorious Gear Limited is a newly formed retail business with 100,000 of owners capital.

• 100,000 ordinary shares are issued at their nominal value of 1 each on the first day in business, August 1 20X9.

• Fixtures and fittings amounting to 20,000 are purchased and paid for on August 1 20X9.

• On the same date 10 new cash till machines costing 2,000 each are purchased and a deposit of 500 per machine paid. The balance is to be paid off in instalments of 1,000 each month. The first instalment is due to be paid on August 1 20X9.

• An initial inventory of goods for resale is bought on 1 August 20X9 at a cost of 40,000 (2 per unit). This purchase price is expected to remain the same for the foreseeable future. The company intends to maintain the level of initial inventory throughout the coming months by replacing inventory sold in the same month as the sale. Suppliers are paid during the month following purchase.

• All sales are made on credit at a price of 4 per unit. Customers will pay during the second month after the sale has taken place. Estimated sales for the next four months are as follows: Administration expenses are expected to be incurred and paid each month at a rate of 20% of sales by value. Depreciation can be ignored.

• Required:

• 1.) Prepare the cash budget for the three months ended 31 October 20X9. You should use a separate column in the budget for each month.

• 2.) Explain the use of budgets as a means of motivating individuals within an organisation.

Month Units August 8,000 September 9,000 October 10,000 November 10,000