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Cash Budgets

Managerial Accounting

Prepared by Diane TannerUniversity of North Florida

Chapter 40

Cash Budget

A VERY important budget Involves the planning and timing of cash flows A necessary supplement to the budgeted

income statement Why?

Cash inflows and outflows

Revenues and expenses I.e., accrual-based income

statement=

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3Sources of Cash Inflows/Outflows

All cash inflows are cash receipts Payments from customers Interest income received

All cash outflows are cash disbursements Payments for inventory purchases Payments for operating expenses Payments for capital expenditures Payments for dividends

4 Cash Budget Formats• Cash receipts budget

– Includes only cash inflows

• Cash disbursements budget– Includes only cash outflows

• Complete cash budget– Detailed format

• Lists cash inflows, cash outflows, and beginning and ending cash balances

– Summary format• A single total for cash receipts and a single total for cash

disbursements • Shows beginning balance plus cash receipts less cash

disbursements and often financing required to achieve a minimum cash balance

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Cash Receipts Budget Example

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April May June July AugustProjected sales revenue $230,000 $220,000 $287,000 $261,000 $255,000

Cynedyne estimates it will collect 24% of its sales during the month of sale, 56% in the month after the sale, and 19% in the second month following the sale. 1% is estimated to be uncollectible. Projected sales are:

Prepare a cash receipts budget in good form for June.

Cash to be received during June from:   June sales $68,880

$287,000 x 24%

$220,000 x 56%

$230,000 x 19%

May sales 123,200

April sales 43,700

Budgeted cash receipts $235,780

Cash Disbursements Budget Example

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  April May June July AugustProjected purchases   $79,000   $95,000   $89,000   $78,000   $82,000Budgeted income tax expense   28,000   24,000   26,000   25,000   24,000

Cynedyne, Inc. provided the following budget information for the next five months:

Prepare a cash disbursements budget in good form for June.

• Inventory purchases: Paid 30% in the month purchased; 70% in the following month. • Operating expenses are budgeted at $91,000 in May, with an increase by $1,500 per month.

Included in the monthly amount is depreciation of $4,200. • Operating expenses are paid 40% in the month incurred and 60% in the next month.• The company make a monthly note payment for $2,850, of which $150 is interest. • Cynedyne pays income taxes during the month after accrual. 

Cash to be paid for June purchases (30% x $89,000) $26,700

Cash to be paid for May purchases (70% x $95,000) 66,500

Cash to be paid for June operating ($92,500 - $4,200) x 40% 35,320

Cash to be paid for May operating ($91,000 - $4,200) x 60% 52,080

Cash to be paid for note and interest 2,850

Cash to be paid for income taxes 24,000

Budgeted cash disbursements $207,450

Summary Cash Budget ExampleCeredyne has a budgeted June 1 cash balance of $16,000. Total budgeted cash receipts are $235,780. Total budgeted cash disbursements are $207,450. Prepare a summary cash budget for June.

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Budgeted beginning cash balance $ 16,000 Add budgeted cash receipts 235,780 Less budgeted cash disbursements (207,450) Budgeted ending cash balance $ 44,330

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The End