Question No 1(8 marks)

A Company wants to prepare cash budget based on the following information. Forecast the cash position for the months of October, November and December. Complete company's estimate.

Sales (Rs.)

Purchases (Rs.)

Salaries (Rs.)

Other expenses (Rs.)

August

440000

168000

20000

11000

September

260000

520000

74000

16000

October

160000

304000

56000

12000

November

232000

412000

50000

24000

December

172000

320000

56000

12000

Additional Information:

Sales: 40% realized in the month of sales, discount on sales 3% in the same month. Balance realized equally in two subsequent months by calculating on gross sales.

Accounts receivable consists of Rs. 100000, company receives 60% in October, and balance received equally in last two months.

Company paid against Purchases in the month following the month of purchases.

30% of the salaries paid in the month of occurrence and remaining is paid in following month.

Other expenses paid in the month of occurrence.

Rent: Rs 1,000 per month paid quarterly in advance in current year during the month of December.

Income-tax; Installment of advance tax of next year Rs 35,000 due on 15th December.

Cash in hand: Rs 5,000 on September 30.

Company arranges financing in case of deficit, if deficit is below Rs. 200000, company takes loan from bank, if more than Rs. 200000, company issues shares.

Loan installment is due during November at Rs. 8000.