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Chapter 40. Cash Budgets. Prepared by Diane Tanner University of North Florida. The Financial Budgets. Budgeted income statement Budgeted balance sheet Budgeted statement of stockholders’ equity Cash budget Combined cash receipts, disbursement, and cash balances
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Chapter 40 Cash Budgets Prepared by Diane Tanner University of North Florida
The Financial Budgets • Budgeted income statement • Budgeted balance sheet • Budgeted statement of stockholders’ equity • Cash budget • Combined cash receipts, disbursement, and cash balances • Budgeted statement of cash flows 2
A VERY important budget Involves the planning and timing of cash flows A necessary supplement to the budgeted income statement Why? Cash Budget = Revenues and expenses I.e., accrual-based income statement Cash inflows and outflows Cash budget often appears as two separate budgets: a cash receipts and cash disbursements budget 3
Possible Cash Budget Formats • Cash receipts budget • Includes only cash inflows • Cash disbursements budget • Includes only cash outflows • Complete cash budget • Includes both cash inflows, outflows, and cash beginning and ending balances • Concise format • One total for cash receipts from the cash receipts budget total and one for cash disbursements from the cash disbursements budget total • Shows beginning balance plus cash receipts less cash disbursements and often financing required to achieve a minimum cash balance 4
Cash Receipts Budget • Collection pattern for PaperPro is: • 70% collected in the month of sale, • 25% collected in the month following sale, • 5% is uncollectible. • All sales are on account. The March 31 accounts receivable balance of $30,000 will be collected in full. 5
Cash Disbursements Example Inventory is paid 50% in the month of purchase, with the balance paid the month following. March 31 accounts payable balance is $12,000. 6
Complete Cash Budget Example • Sanders maintains a 16% line of credit for $75,000. • Maintains a minimum cash balance of $30,000. • Borrows on the first day of the month and repays loans on the last day of the month. • Pays a cash dividend of $49,000 in April • Purchases $143,700 of equipment in May and $48,300 in June paid in cash • April 1 cash balance of $40,000 7
