Question

Better Books have asked you to assist them with the preparation of their cash budget for
November 2020. The following details have been made available to you:
• Sales – 50% of the sales generated by Better Books are cash sales, 20% of the sales are
still paid in the same month of the sale, and these customers receive a 3% discount.
28% of sales are paid in the month after the sale took place. The remainder of sales
are not recoverable and these clients will never pay.
• Purchases – Better Books have an agreement with their suppliers whereby all
purchases are made on credit. Payment takes place as follows – 40% of purchases are
paid in the month after the purchase and the remaining 60% is paid in the second
month after the purchase.
• Other expenses – Additional expenses, which include Rent, Salaries, Telephone and
Insurance, are all paid in the month when the expense is incurred and amount to $25
000 per month.
Month Sales Purchases
August $70 000 $55 000
September $60 000 $60 000
October $75 000 $67 000
November $90 000 $45 000
December $100 000 $90 000
On 1 November 2020 Better Books had a favourable bank balance of $35 000.
Required:
Prepare a cash budget for November and December 2020, indicating to Better Books what
the budgeted balance of their bank account will be on 1 January 2021

Answer 1

Answer:

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