Defination
A cash budget is an estimation of the money flows of an enterprise over a particular time period. This could possibly be for a weekly, month-to-month, quarterly, or annual price range. … The cash budget range supplies an organization’s perception into its money wants (and any surplus) and helps to find out an environment-friendly allocation of money.
When getting ready the money budget, all the next ought to be thought of besides
A. Cash receipts from clients
B. Cash funds for the merchandise
C. Depreciation expense
D. money funds for earnings taxes
E. Cash funds for capital expenditures
Cash Budget
The cash budget is ready after all of the operational budgets like gross sales finances, purchases finances, manufacturing finances, and so forth. The money finances are ready within the final whereas the gross sales finances are taken into account as the first finances, The money finances are ready within the final so that every one the outflows and inflows might be estimated throughout the interval.
What are the essentials of a budget?
A good plan is a key to success and a budget is a quantitative plan. The budget has some advantages which are as follows:
1. Budget communicates management’s plans through on the organization.
2. It makes helps to remove waste
3. It enables standard costs to be used.
4. It reveals the extent to which actual results have exceeded or fallen short of the budget.
5. It is a tool of control. 6. It can uncover potential obstacles before they occurred.
7. It increases the efficiency of the employee.
8. It helps to make comparisons between the target and the actual result.
9. It provides benchmarks to evaluate subsequent performance.
10. Through budget pre-caution is possible about the weak position of the company
Discuss the factors of preparing cash budget.
The factors to be considered while preparing the cash budget are :
1. Estimated opening balance.
2. Monthly sales value in sales budget.
3. Cash and credit sales ratio, credit sales, and terms
4. Monthly purchases.
5. Supplies credit policy and credit terms.
6. Amount of salaries, wages, and commissions.
7. Capital budget.
8. Estimated amounts of operating expenses on the basis of credit terms and timing of disbursement.
9. Minimum cash balance to be maintained.
