When building a cash budget,the following items are budgeted for the first quarter:

20% of all sales are cash sales.The remaining sales are on credit and customers have 30 days to pay.
All purchases are made on credit and paid after 2 months.
Wages are paid in the month they are incurred.
Other Expenses include depreciation at £1,000 per month.
What is the expected net cashflow in March?

Question

When building a cash budget,the following items are budgeted for the first quarter:

20% of all sales are cash sales.The remaining sales are on credit and customers have 30 days to pay.
All purchases are made on credit and paid after 2 months.
Wages are paid in the month they are incurred.
Other Expenses include depreciation at £1,000 per month.
What is the expected net cashflow in March?

Quizplus · Accepted Answer

In March, the company will have cash sales of £3,000 and income from February Credit Sales of £9,600 (80% of the £12,000 sales in February). A total income of £12,600.It will pay the £6,000 purchases made in January. It will also have wages of £1,500 and other expenses of £1,000. The depreciation is not cash. Total payments £2,500.So the net cashflow is £9,600 - £2,500 = £4,100.

When Building a Cash Budget,the Following Items Are Budgeted for the First