Kerrydale Ltd is in the process of preparing budgets for the period October to December 2019.The following information has been provided by the accounting department to assist in the budgeting process:

(i)Budgeted monthly sales revenue is as follows:

October 2019

50,000

November 2019

80,000

December 2019

60,000

January 2020

55,000

Sales are 20% cash and 80% on credit. 5% of the credit sales will not be received. The remainder of the credit sales are collected over a 3 month period: 15% in the month of sale, 70% in the month following sale and 15% in the second month following sale.

Total sales revenue in August is expected to amount to 40,000 and in September to 46,000.

(ii)Purchases are expected to amount to 47,500 in October, 43,000 in November, and 27,750 in December.50% of purchases are paid in the month of purchase.The remaining 50% is paid for in the month following purchase. At 30 September, the amount owed for purchases was 11,700.

(iii)A grant of 20,000 from Glasgow City Council is expected to be received in mid-October.

(iv)A van which cost 8,000 when purchased 5 years ago, is expected to be sold in December for 3,000.The net book value of the van is 1,800.

(v)Equipment costing 4,500 will be purchased in November. The equipment will be depreciated on a straight line basis over 4 years.

(vi)Operating expenses are paid as incurred.These have been estimated to be 12,800 in October, 18,900 in November, and 14,600 in December.Each of these figures includes depreciation on existing assets amounting to 2,000 per month.

(vii)The cash balance on 1 October 2019 is expected to be 8,000.

Required:

(a)Indicate a cash budget on a monthly basis for the period between October 2019 and December 2019.

(b)Outline three items which would be included in a cash budget but not in a budgeted statement of profit and loss.

(c)Briefly explain three potential issues associated with the traditional budgeting process.