You own a new restaurant that is due to open on June 1.

The restaurant expects to take in $500 a day in sales revenue and is open seven days a week.

Sales revenue is estimated to be 80% cash and 20% credit. The payments on credit sales are not expected to be received until the end of the month following the sale.

Labour and food cost combined will be 70% of sales revenue. Both these expenses will be on a cash basis.

Other operating costs are estimated to be 10% of sales revenue. These costs will not have to be paid until the month following the incurrence of the cost.

Depreciation is $1,000 a month.

Rent is $300 a month payable in advance on the first of each month.

Principal payments on a loan you made to get into business are $3,000 a month. The first payment is due on June 15.

You have only $500 cash on hand on June 1. You will not be able to borrow any more money, and you have no income of your own other than the money generated by your new restaurant venture.

Required:

Produce the restaurants budgeted income statement and budgeted cash flow for the month of June. What advice can you give regarding this venture?

Discuss what information is available in the cash budget that is not available from the income statement.