Chapter 4 Cash budgets

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a

Budgeting,

second edition, by Banks & Giliberti Slides prepared by Mya Aronfeld

4-1

Cash budgets

 Cash receipts budget: Estimated receipt of cash from

all

sources.

 Cash payments budget:

All

estimated payments of cash by the business.

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a

Budgeting,

second edition, by Banks & Giliberti Slides prepared by Mya Aronfeld

4-2

GST and cash budgets

    This unit assumes all businesses are registered for GST and pay their liability monthly. Collection of Goods & Services Tax (GST) when the business makes a taxable supply.

Taxable supply:

a sale of a good or service that is not GST-free or input taxed.

GST input tax credits:

a credit for the GST included in the purchase of a good or service. Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a

Budgeting,

second edition, by Banks & Giliberti Slides prepared by Mya Aronfeld

4-3

Sample cash receipts budget where all receipts are GST-free or input taxed

Cash receipts budget for the quarter ending 30 September Consultion fees received Cash sales Rental income Interest received Total cash receipts July $ 12510 3200 500 16210 August $ 11970 2980 500 15450 Sept.

$ 10880 2740 500 150 14270 Total $ 35360 8920 1500 150 45930 Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a

Budgeting,

second edition, by Banks & Giliberti Slides prepared by Mya Aronfeld

4-4

Sample cash payments budget where some acquisitions include GST (p. 61)

Cash payments budget for the quarter ending 30 September (p. 61) July $ August $ Sept $ Total $ Cash purchases Rent Laundry Telephone Insurances Stationery Vehicle running costs Massage table

Payments including GST

GST input taxcredit Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a

Budgeting,

second edition, by Banks & Giliberti Slides prepared by Mya Aronfeld

4-5

Cash budget format

   Cash balance @start

add

cash receipts

add

GST refund total cash available for needs   cash payments

add

GST payable total payments  Cash balance @end Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a

Budgeting,

second edition, by Banks & Giliberti Slides prepared by Mya Aronfeld

4-6

Collections from debtors

    Calculate cash and credit sales (p. 65).

work out cash sales GST exclusive work out GST payable on cash sales work out credit sales GST inclusive  Prepare a collection from debtors schedule for the budget period.

 Show separately at bottom of schedule the GST payable included in the figures.

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a

Budgeting,

second edition, by Banks & Giliberti Slides prepared by Mya Aronfeld

4-7

Dermott Jewellers

(p. 69) Schedule of collections from debtors for the quarter ending 31 March Month received Feb March

$ $

Month of sale

October November December January February March

Total collections

$ 33600 38400 42000 39600 31200 40800

Jan

$

Total

$ GST included above Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a

Budgeting,

second edition, by Banks & Giliberti Slides prepared by Mya Aronfeld

4-8

GST reported on accrual basis

     GST is payable at point of sale.

Input tax credit is receivable when the entity receives the tax invoice.

GST adjustment for a bad debt is made when the debt is actually written off as bad.

GST adjustment for discount allowed is made when discount is given.

GST collected each month is not the same as GST payable.

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a

Budgeting,

second edition, by Banks & Giliberti Slides prepared by Mya Aronfeld

4-9

Collection from debtors with discount allowed and doubtful debts (p. 71) Schedule of collections from debtors for the quarter ending 30 September July

$

Month received August Sept

$ $

Month of sale

May June July August September $ 39900 44100 50400 35700 25200

D. Debts Dicount

$ $

Total collections

GST included above

Total

$ Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a

Budgeting,

second edition, by Banks & Giliberti Slides prepared by Mya Aronfeld

4-10

Desired balance and financial requirements

 Management may desire to have a minimum cash balance.

 May involve borrowing funds to attain required balance.

 Borrowings are made in the month that a deficit is likely.

 There may be conditions attached to the amounts that can be borrowed.

Copyright  2003 McGraw-Hill Australia Pty Ltd PPTs t/a

Budgeting,

second edition, by Banks & Giliberti Slides prepared by Mya Aronfeld

4-11