QUESTION 1

The following forecasted information was taken from the books of Pakhama Enterprises.

Month 2020 Budgeted Sales

January R 120 000

February R 140 000

March R 168 000

April R 144 000

May R 128 000

June R 100 000

The following information is also provided for Pakhama Enterprises: 60% of all sales is on credit.

Debtors are expected to pay their debts as follows:

70% in the first month after the sale (after 30 days)

20% in the second month after the sale (after 60 days)

7 % in the third month after the sale (after 90 days)

3% is irrecoverable

Credit losses are written off at the end of the month in which the last installment is received. Debtors will amount to R 104 994 on 1 Jan 2020.

Total sales for 2019 are as follows:

October 2019 = R 120 000

November 2019 = R 132 000

December 2019 = R 135 000

a) Prepare the schedule of budgeted receipts from debtors for the period 1 January 2020 to 31 March 2020. Round to two decimals.

b) Pakhama Enterprises wants to extent its credit terms in order to increase the sales to grow the business. A consultant has, however, warned them that this can lead to overtrading.

Do some research on overtrading and preparee and email to management in which youu explain what overtrading is as well as what the dangers of overtrading are.

Remember to reference youur answer and add your reference list to the bottom of this question.