Subject is Basic Accounting

Question 5 Mahsuri is preparing budgets for the second half of Year 2021. The cash forecasts for the 6 months of Year 2021 are given below: July Augus Septemb October November December RM t er RM RM RM RM RM 40,000 48,000 50,000 60,000 80,000 100,000 Sales 25,000 5,000 19,000 30,000 6,000 21,000 40,000 8,000 25,000 50,000 10,000 29,000 Cost: 20,000 24,000 Materials 4,000 4,800 Wages 17,000 18,600 Overheads 41,000 47,400 Surplus/(deficit) (1,000) 600 49,000 1,000 57,000 3,000 73,000 7,000 89,000 11,000 5% cash discount will be allowed for receipts in month of sale. 50% of customers are expected to pay in the month of sale; 30% will take one month's credit, and 20% will take 2 months' credit. Materials are purchased and used in the month in which goods are sold. Creditors for materials are paid in the following month. 75% of wages are paid in the month incurred. The remainder (25%) is paid in the following month. Overheads include a monthly charge of RM2,000 for depreciation. 10% of the creditors for overheads are paid in the same month incurred. The remainder (90%) is paid in the following month. The company is having a new building constructed and the first instalment of RM10,000 will be paid in October. Sales for the last TWO (2) months of first half year 2021 were: May - RM60,000 June - RM50,000 In June 2021 materials purchased were RM25,000. Wages were RM5,000 and overheads were RM16,000 (including RM2,000 depreciation). The expected cash balance at beginning of July 2021 is RM1,250. Required: a. Prepare the Cash Budget for each of the last 6 months of Year 2021. (16 marks) b. Comment on the cash budget results above. (4 marks)