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You are provided with the given information relating to Cello Ltd. The accountant is presently preparing the budget for the next three months ending 30 June 2010.

1987_preparing the budget.jpg

a) The credit terms are as shown below: 10% sales are cash, 50% of the credit sales are collected next month and the balance in the given month.

b) For the given items of expenditure, the credit terms are as shown below:

194_credit terms.jpg

c) Cash and bank balance on 1st April 2010 is expected to be Rs 6 000.

d) Other relevant information:

i) Plant and Machinery will be installed in February 2010 at a cost of Rs 96 000. The monthly installments of Rs 2 000 is payable as from April onwards,

ii) A dividend of 5% on the ordinary share capital of Rs 200 000 will be paid on 1st June.

iii) An advance receipt of Rs 9 000 is expected in June and will associate to the sale of vehicles.

iv) Dividends from investments amounting to Rs 1 000 are to be received in May.

v) An advance payment of income tax is to be paid in June of Rs 2 000.

Required:

problem 1: Make a cash budget for the three months ending 30 June 2010.

problem 2: In brief describe the advantages of a cash budget.

Cost Accounting, Accounting

  • Category:- Cost Accounting
  • Reference No.:- M96759

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