Cash Budgeting for MIS Trading: Second Quarter 2012

How can we prepare a cash budget for MIS Trading for the second quarter of 2012?

Let's break down the information and calculate the cash inflows and outflows for each month to prepare the cash budget for MIS Trading for the second quarter of 2012.

Step-by-step guide to preparing the cash budget for MIS Trading:

To prepare the cash budget for MIS Trading for the second quarter of 2012, we need to analyze the given information and calculate the cash inflows and outflows for each month.

Sales and Cash Collections:

Calculate the cash sales by multiplying the unit sales by the selling price per unit. Calculate the credit sales and determine the cash collections based on the given collection percentages.

Cash Dividend:

Add the cash dividend of RM6,000 received in June to the cash inflow for that month.

Raw Materials Purchases:

Calculate the raw materials cost for each month and determine the credit purchases and cash payments based on the given payment percentages.

Direct Wages:

Calculate the direct wages cost for each month by multiplying the unit sales by RM5.

Quarterly Tax Payments:

Allocate the quarterly tax payments of RM8,000 each to the respective months (March and June).

Fixed Monthly Expenses:

Add up the fixed monthly expenses: rent, selling expenses, and depreciation.

Cash Balance:

Use the ending cash balance in March as the starting cash balance for April and maintain a minimum cash balance.

To prepare the cash budget for MIS Trading for the second quarter of 2012, we need to analyze the given sales forecasts and financial information to calculate the cash inflows and outflows for each month. This will help us understand the company's cash position and plan accordingly to ensure smooth operations and financial stability.

Firstly, we need to calculate the cash inflows by determining the cash sales, credit sales, and other sources of cash such as dividends. By analyzing the sales forecasts and collection percentages, we can determine the amount of cash that will be collected in each month.

Next, we need to consider the cash outflows, including raw materials purchases, direct wages, tax payments, and fixed monthly expenses. By calculating these expenses based on the given percentages and costs, we can estimate the cash outflows for each month.

It is essential to monitor the cash balance to ensure that the company maintains a minimum cash balance and avoids cash shortages. By preparing a detailed cash budget for MIS Trading, the company can make informed financial decisions and plan for future growth and stability.

By following the step-by-step guide provided above and summarizing the cash inflows and outflows in a cash budget table, MIS Trading can effectively manage its cash flow and achieve its financial goals for the second quarter of 2012.

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