Section No.
Question 1
Calculate the balance of Accounts Receivable and Accounts Payable as of November 30, 2012.
Accounts receivable, in the foregoing case study will be computed as the balance of sales less the 70% receipts for each particular month. For the month of November, the balance of accounts receivable will be computed as follows.
This will be the balance of accounts payable, after the cash payment of 80% of all purchases in the month of November and will be calculated as:
B)
Sales budget for December
This will be calculated as
Beginning with the sales for November, we add the 10% increase, as shown above. Therefore, the company budgets to sell goods amounting to AED 825,000
Purchases budget for December
C). Cash collection schedule
This is a schedule that shows all the cash to be collected in the month of December
As shown above, the cash collection schedule for December includes the 30% accounts receivable from the sales for November, i.e (30%*750,000), as well as the 70% sales receipts in the month of December i.e. (70%*825,000)
Cash disbursement schedule
The cash disbursement schedule shows the budgeted cash payments for the month of December. We begin by paying for inventory, which is 80% of the budgeted purchases, i.e. (80%*387,525), Selling expenses (155,000+18,000), administrative expenses (170,000+10,500). Lastly, is the budgeted furniture and equipment purchase amounting to 50,000 as well as interest payments worth 150
D. Cash budget for the month of December
The cash balance, has two sections, the cash receipts and the cash payments section.
In order to construct the cash balance, we begin with the November ending cash balance of 20,000. This is then added to the sales receipts for December and the accounts receivable from November.
We then less the cash disbursements for the month, which include the 80% inventory purchases, 20% inventory purchases for November, selling expenses, admin expenses, furniture purchases and interest expenses. The balance is then carried forward to be the opening balance for January 2013.
E. Balance of accounts
Breakeven point in Units
References
Fridson, S. M (2010) Financial Statement analysis. A practitioner’s guide. University of Michigan
Siegel, J.G (2008) How to analyze businesses, financial statements and the quality of earnings. University of California.
Welsh,A.G (1976) Budgeting: profit planning and control. Prentice-Hall
