Budgeting

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Chapter 9: Budgeting

Discussion Questions

9.1 State the different types of budgets that may be prepared.

Different budgets include: sales or fees budget; operating expenses budget; production and inventory budgets; budgeted income; cash budget; budgeted balance sheet; and the capital budget.

P9.7 Preparation of receipts from debtors schedule and cash budget Ken Martin, manager of Lonnie Car Repairers, has requested that you prepare a cash budget for the months of December and January. He has provided the following information to assist in this task: • Projected cash balance at the end of November is $30 000. • Actual revenue for October and November and projected revenue for December and January are as follows:

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• Analysis of past records has shown that credit sales are collected over a three-month period, with 50 per cent being collected in the month of the sale, 40 per cent in the next month, and the remainder in the following month. • Projected expenditure during December and January is as follows: − Selling and administrative expenses are budgeted to be $58 000 each month. − A new car hoist will be purchased for $100 000, with a $20 000 cash payment in December and the balance to be paid in March. − Ken wants to maintain a minimum cash balance of $30 000. − As more customers will want their vehicles serviced prior to Christmas, the consumables store will need more supplies. Accordingly, an order has been placed for $45 000 of inventory. This will arrive in late November and be paid in December.

Required a. Prepare a schedule showing receipts from customers for the credit sales.

Receipts from Debtors Schedule for two months ending 31 January

| |December |January |
|October $60 000 |6 000 |

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