Q3

A newly formed company supply electronic products to higher educational institutions across the country. The company has approached it Bankers to provide funding for the 2023 operations and a three-month master budget has been requested for review by the bankers.

You have been approached by the management as a consultant to prepare the first quarter budget for the bankers consideration for the operation in 2023.

End of Accounting Year December 2022

GH000

Debtors

23,000

Bank balance

55,000

Non-current assets at cost

698,000

Provision for depreciation balance

98,000

Creditors balance

48,000

Operating expenses for the month of December

60,000

Sales for the month of December

400,000

December ending inventory

20,000

Retained earnings

120,000

The following additional information was also provided to assist your work.

i) Depreciation is provided at the rate of 5% on cost of non-current assets

ii) Closing inventory is expected to increase by GH2,000,000 in January from December levels. This is expected to increase by the same figure in February from the projected figure in January. It is expected that in March closing inventory is desired to be GH26,000,000.

iii) The company makes a profit of 25% on its sales.

iv) Operating expenses is expected to increase by 10% from that of December and this is projected to increase at the same growth rate to March.

v) Sales is projected to grow by 15% from December until March.

vi) The debtors figure is desired to be proportional to the sales values.

vii) Creditors value for the three months are expected to be as follows: January - GH50,000,000; February - GH46,000,000 and in March - GH52,000,000.

You are required as a consultant for the company to prepare for their bankers:

i) The budgeted statement of profit or loss for the three months

ii) The budgeted statement of financial position for the three months

The cash budget for the three months