Hi,

I'm pretty new to accounting. Can you explain why these expenses (payroll 170,000 and supplies 48,000) go in the cash budget instead of the operating budget?

Thanks,

Payroll Payment		170,000
Supply Payments		48,000

2-22 Children's Best Hope (CBH) provides day care services to low-income families. CBH bills the state for its services under a service contract. Billings for the first 4 months of 2017 are anticipated to be as follows: January $220,000 February March $200,000 $240,000 April $230,000 CBH finds that it collects 25 percent of the amounts billed in the month of service with the balance collected in the month following service. CBH is planning to acquire a new building as an additional site for its services in March 2017. The full $250,000 purchase cost of the building will be financed with a mortgage loan. CBH anticipates a February 28, 2017, cash balance of $26,000. CBH anticipates the following expenses and disbursements for the month of March 2017: Payroll payments $ 170,000 Personnel expenses $ 160,000 Payments to suppliers $ 45,000 Supplies expense $ 48,000 Depreciation expense $ 12,000 Interest expense $ 6,000 First of all we will prepare the operating budget as under for the month of the march Operating Budget March Total Revenue 240,000 Expenses Payroll 170,000 Supplies 48,000 Depreciation 12,000 Interest 6,000 Total Expenses 236,000 Profit/(Loss) 4,000 Cash Budget March Beginning Balance $ 26.000 Cash Receipts February Billings 150,000 March Billings 60,000 Total Collections 210,000 Total Cash Available 236,000 Disbursements Payroll Payment 170,000 Supply Payments 48,000 Building Acquisition 0 Total Disbursements 218,000 Cash Surplus/(Shortfall) 18,000 Borrowing/(Repayment) Ending Cash Balance $_ 18,000