On April 1st, your ﬁrm had a beginning cash balance of £280.Your sales for March were £460 and your April sales were £510.During April you had cash expenses of £130 and payments on your
Trade payables to £210.Your trade receivables period is 30 days.What is your ﬁrm's beginning cash
Balance on May 1st?

Question

Quizplus · Accepted Answer

The beginning cash balance on May 1st is calculated by adding the beginning cash balance on April 1st (£280) to the cash inflows from April sales (£510) and subtracting the cash expenses (£130) and payments on trade payables (£210). This results in a cash balance of £450. However, since the trade receivables period is 30 days, the sales from April (£510) will not be collected until May, so they are not included in the cash balance for May 1st. Therefore, the correct beginning cash balance on May 1st is £400.

On April 1st, Your ﬁRm Had a Beginning Cash Balance