Cash budget only records strictly cash movements. For example, Depreciation is not affected as it’s a loss of value of fixed assets which is not a loss of cash. Bad debts from creditors and cash discounts given by debtors are not included in the cash budget as well..
Lets take a look at the cash budget attached. The bank balance started with $22000. A figure given in the case study. Total receipts in February are $1167000, figures from sales made. Total payments or disbursements are $1270000. Figures derived from cash outflows. The total receipts amount minus total payments ($1167000-$1270000), there’s a shortfall of $103000. The amount was then minus against beginning balance of $22000 to come to the closing balance for the month of February. Which is $119000.
In March, the same procedure of cash budget is done similar to previous month. The closing balance figure for February is brought forward as the beginning cash balance for March. There is an additional taxation payout for this month. When all calculations are made, the closing balance for March is a shortfall of $168000.
In April, purchases of vans were made, therefore there’s an additional payout. After all receipts and payments were made, the closing balance came to another shortfall of $399000.
From the scenarios and conclusion to the figures above, this business is in a bad cash position. It has decreased from its opening balance from $22000 to overdraft of $399000 in just three months.