Cash Budgeting and Optimum Cash, Inventory Management, Working Capital Cycle

1. Working Capital /Current
Assets Management
0
2
4
6
8
10
12
14
16
18
2 3 4 5 6 7 8
CostsinRs000's
Balance in 000' Units
Baumol’s Optimum Cash Model
Dr. A N Shankar
Associate Prof. in Commerce
Sikkim University
Gangtok
E-Mail:anshankar9@gmail.com

2. Concept:The subject is concerned with planning organisation, direction,
coordination, appraisal, review and control of investment in Current assets
and Current liabilities. This ensures healthy flow of finance in the organisation
maximising performance parameters commensuration with investment.
Gross Working
Capital: Total of
Current Assets
Net Working
Capital
Difference between Total
of Current Assets and
Total of Current
Liabilities
Part of Total Assets that is funded
by Long-Term funds: Current
Liabilities represent short term funds
the excess must be funded with the
long term sources.

3. Dynamic
Nature of Working Capital
Management

5. Current
Assets
%age
Fixed
Assets
%age
Industries
10-20 80-90 Hotels and Restaurants
20-30 70-80 Electricity Generation and Distribution
30-40 60-70 Aluminium and Shipping
40-50 50-60 Manufacturing ,Iron and Steel, Industrial
Chemicals
50-60 40-50 Tea, and other Plantation
60-70 30-40 Cotton Textiles, Sugar
70-80 20-30 Edible Oils, Tobacco,
80-90 10-20 Trading, Construction

6. Working Capital Policies
Passive
(Conservative)
Comparatively
more permanent
investment in
Current Assets
(C)
Moderate
Part of Current
Assets are
funded by
Short-Term
Sources
(B)
Aggressive
Most of the
Fluctuating
needs are met
by Short-Term
Sources
(A)

7. Hypothetical Schedule for Working Capital Needs Across the Policies (Amounts in Rs )
Time
Quarters
Fixed
Total
(Fixed + Fluctuating)
Aggressive
A
Moderate B Conservative C
1 5000 7000 7500 10000 12000
2 5500 9500 10050 12800 15000
3 6000 12000 12600 15600 18000
4 6500 14500 15150 18400 21000
5 7000 13000 13700 17200 20000
6 7500 11500 12250 16000 19000
7 8000 10000 10800 14800 18000
8 8500 12500 13350 17600 21000
9 9000 15000 15900 20400 24000
10 9500 17500 18450 23200 27000
11 10000 16000 17000 22000 26000
12 10500 14500 15550 20800 25000
13 11000 13000 14100 19600 24000
14 11500 13500 14650 20400 25000
15 12000 16000 17200 23200 28000
16 12500 18500 19750 26000 31000
17 13000 21000 22300 28800 34000
18 13500 19500 20850 27600 33000
19 14000 18000 19400 26400 32000
20 14500 16500 17950 25200 31000
21 15000 19000 20500 28000 34000
22 15500 21500 23050 30800 37000
23 16000 24000 25600 33600 40000
24 16500 22500 24150 32400 39000
25 17000 21000 22700 31200 38000
26 17500 19500 21250 30000 37000

8. 0
5
10
15
20
25
30
35
40
45
0 5 10 15 20 25 30
WorkingCapitalDemandinRs000's
No. of Quarters
Policywise Working Capital Needs
Conservative C
Moderate B
Aggressive A
Total WC
WC Fixed in Rs

9. Operating Cycle
The total time taken to complete one cycle of operation.
Raw
Material
Work in
Progress
Finished
Goods
Average
Debtors
Pay BackTime
Miscellan
eous
Receivabl
es
Miscellan
eous
Payables
Payment
Creditors

10. Computation of Operating Cycle
Note: The No. of Days May be expressed in terms of 52 weeks or 12 months or 26 fortnights OR 360 Days

11. Estimation of Working Capital
Estimation of Current Assets
a) Minimum Desired Cash balance
b) Inventory
i) Raw material
ii) Work-in- Progress
iii) Finished Goods
c) Debtors and Receivables
Total Current Assets (A)
Estimation of Current Liabilities
a) Creditors
b) Wages
c) Overheads
Total Current Liabilities (B)
Net Working Capital (A)-(B)
Add: Contingency
Net Working Capital Required

12. Illustration
From the following information about NWC Ltd.you are required to project the working
capital requirement of the company: Selling the product @ Rs 200/Unit,
Additional Information:
Raw material Holding Period 4 weeks, Work in Progress ; (50% of Conversion Costs and
100% of Raw Materials) 2 weeks. Finished Goods in Stock 4 weeks, Creditors allow 4
weeks, Debtors are allowed 8 weeks, Wages are paid 1½ weeks . Expected Cash at Bank Rs
25, 000. Assume Production is evenly carried out through out the year, and overheads and
wages accrue similarly. All sales are on credit basis. Maintain Contingency @10% on Net
Working Capital
Estimated Cost per unit of production: Activity Level (1,04,000 Units Per Annum) Amounts
in Rs
Raw Material 100
Direct Labour 30
Overheads Rs 60 (Exclusive of Depreciation Rs 10) 60
Total (Cash)Cost 170

13. Working Capital Estimation of NWC Ltd. For 1,04,000 Uts Capacity
Particulars
%ag
e
Cost
Producti
on Uts
Wee
ks
Wks in
Year
Amount in
Rs
Raw Material 80 1,04,000 4 52 6,40,000
Work in Progress
Raw Material (100%) 1 80 1,04,000 2 52 3,20,000
Direct Labour (50%) 0.5 30 1,04,000 2 52 60,000
Overheads (50%) 0.5 60 1,04,000 2 52 120,000
Finished Goods Stock 170 1,04,000 4 52 1,360,000
Debtors 170 1,04,000 8 52 2,720,000
Cash at Bank 25,000
Total Current Assets (A) 52,45,000
Creditors 80 1,04,000 4 52 6,40,000
Wages 30 1,04,000 1.5 52 90,000
Total Current Liabilities (B) 7,30,000
Net Working Capital (A)-(B) 45,15,000
Add Contingency 4,51,500
Net Working Capital 49,66,500

14. From the following information about NWC Ltd.you are
required to project the working capital requirement of the
company: Selling the product @ Rs 200/Unit,
Additional Information:
Raw material Holding Period 21 days, Work in Progress ; (30% of
Overheads 25% of Labour and 100% of Raw Materials) 21 days.
Finished Goods in Stock 30 days, Creditors allow 30 days, Debtors are
allowed 30 Days, Wages are paid 15 days . Expected Cash at Bank Rs
25,000. Assume Production is evenly carried out through out the year,
and overheads and wages accrue similarly. All sales are on credit basis.
Maintain Contingency @10% on Net Working Capital.
Estimated Cost per unit of production: Activity Level (2,00,000 Units Per
Annum)
Amounts
in Rs
Raw Material Rs 100 100
Direct 30
Overheads Rs 60 (Exclusive of Depreciation Rs 10) 60
Total (Cash)Cost 190

15. Working Capital Estimation of NWC Ltd. For 200000 Uts Capacity
Particulars %age Cost
Productio
n Uts
Days
No of
Days
Amount in Rs
Raw Material 100 200000 21 365 1,150,684.9
Work in Progress
Raw Material (100%) 1 100 200000 21 365 1,150,684.9
Direct Labour (25%) 0.25 30 200000 21 365 86,301.4
Overheads (30%) 0.3 60 200000 21 365 207,123.3
Finished Goods Stock 190 200000 30 365 3,123,287.7
Debtors 190 200000 30 365 3,123,287.7
Cash at Bank 25,000.0
Total Current Assets (A) 8,866,369.9
Creditors 100 200000 30 365 1,643,835.6
Wages 30 200000 15 365 246,575.3
Total Current Liabilities (B) 1,890,411.0
Net Working Capital (A)-(B) 6,975,958.9
Add Contingency 0.1 697,595.9
Net Working Capital 7,673,554.8

16. A Company needs loan from a bank to fund its working capital. Following are
the details. Maintain 15% for contingencies.
Particulars Amounts in Rs Amounts in Rs
Materials Used 8,40,000
Wages and Manufacturing Expenses 6,25,000
Depreciation 2,35,000 17,00,000
Less Stock of Finished Goods (10% Unsold) 1,70,000
Cost of Goods Sold 15,30,000
Sales 21,00,000
Cost of Goods Sold 15,30,000
Gross Profit 5,70,000
Administrative Expenses 1,40,000
Selling Expenses 1,30,000 2,70,000
Profit Before Tax 3,00,000
Provision for Tax 1,00,000
Goods amounting to 15% are in Work in Progress; includes 100% of raw material, and 40% of other
expenses, company maintains stock of raw material equivalent to two months of production . Desired
cash balance is Rs 40,000. Average time lag in payment of wages is 1 month, Suppliers extend one
month of credit, 20% of sales are in cash., rest are for two months of credit. 70% of Income tax has to
be paid in advance in quarterly installments.
Provide a projected working capital statement to the bank for availing loan.

17. Solution Working Capital Estimation of NWC Ltd. For 200000 Uts Capacity
Particulars %age Costs in Rs Months Months in Year Amount in Rs
Raw Material 8,40,000 2 12 140,000
Work in Progress
Raw Material (100%×15%) 0.15 8,40,000 NA NA 126,000
Direct Labour (40%×15%) 0.06 6,25,000 NA NA 37,500
Finished Goods Stock
= (1,70,000- (0.1 ×2,35,000)) =1,70,000-23,500
146,500
Debtors
Cost of Goods Sold (CGS) = 15,30,000
Less Depreciation (0.9x2,35,000) 2,11,500
Cash Cost 13,18,500
Add: Administrative Expenses 1,40,000
Add : Selling Expenses 1,30,000
Total Cash Cost of Goods Sold (CGS) 15,88,500
Credit Sales =(80% of (Cash CGS)) 0.8 12,70,800 2 12 211,800
Cash at Bank 40,000
Total Current Assets (A) 701,800
Wages and Manufacturing Expenses 6,25,000 1 12 52,083.3
Administerative Expenses 1,40,000 1 12 11,666.7
Selling Expenses 1,30,000 1 12 10,833.3
Creditors 8,40,000 1.5 12 1,05,000
Total Current Liabilities (B) 1,79,583.3
Net Working Capital (A)-(B) 522,216.7
Add Contingency 0.15 78332.51
Net Working Capital 600549.2

18. Duration of Working Capital = Raw materials Holding Period + Work-in Progress
Holding Period+ Finished Goods Holding Period+ Debtors Collection Period- Creditors Pay
back Period. Longer the duration Greater is demand for Working Capital

19. Calculate duration of Operating Cycle of X Ltd. and comment
(All amounts are in Rs)
Particulars Year-I Year-II
Stock:
Raw Material 20,000 27,000
Work in
Progress
14,000 18,000
Finished Goods 21,000 24,000
Purchase of
Raw Material
96,000 1,35,000
Cost of Goods
Sold
1,40,000 1,80,000
Sales 1,60,000 2,00,000
Debtors 32,000 50,000
Creditors 16,000 18,000
Solution
Particulars
Year-I Year-II Days Holding
Period in
Days
Stock:
Raw Material 20,000 27,000 360 75 72
Work in
Progress
14,000 18,000 360 36 36
Finished Goods 21,000 24,000 360 54 48
Purchase of Raw
Material
96,000 135,000
Cost of Goods
Sold
1,40,000 180,000
Sales 1,60,000 200,000
Debtors 32,000 50,000 360 72 90
Creditors 16,000 18,000 360 -60 -48
Total 177 198
Since in the year-II the Number of days in duration is greater by 21 days approximately one month
additional working capital demand is required to be maintained as compared to Year -I

20. Calculate duration of Operating Cycle in weeks of Z Ltd. and comment
(All amounts are in Rs)
Particulars Year-I Year-II Weeks Holding
Period in
WeeksStock:
Raw Material 50,000 65,000 52 17 14
Work in Progress 40,000 58,000 52 15 17
Finished Goods 48,000 60,000 52 18 17
Purchase of Raw
Material
150,000 250,000
Cost of Goods Sold 140,000 180,000
Sales 295,000 320,000
Debtors 59,000 64,000 52 10 10
Creditors 45,000 52,000 52 -16 -11
Total 45 47
Particulars Year-I Year-II
Stock:
Raw Material 50,000 65,000
Work in
Progress
40,000 58,000
Finished Goods 48,000 60,000
Purchase of
Raw Material
1,50,000 2,50,000
Cost of Goods
Sold
1,40,000 1,80,000
Sales 2,95,000 3,20,000
Debtors 59,000 64,000
Creditors 45,000 52,000
Since in the year-II the Number of weeks in duration is greater by 2
approximately half a month’s additional working capital demand is
required to be maintained as compared to Year -I

21. Inventory
Pile of stocks or assets the firm stores as raw materials, semi finished goods and
the finished goods. Management of inventories is the discourse of all the
functional areas.
Need : Investment in inventories is not less than 75% of the overall working
capital needs. The nature of inventories determines its vulnerability to losses.
Counter balancing Inventory management decisions :
Optimum investment Meet the market demand
Concepts :
Process Or Movement inventories : Stock required for processes.
(This varies across the type of products)
Average quantity in Process = Average Process Out Put x Time Taken per Process
Organisation inventories: Stock to maintain the latitude in Planning and
Scheduling successive operations.

22. EOQ Model
• Ordering Costs: Expenses involved in
preparation for placing orders,
transportation and placing the inventory
in storage. ( Requisition, set-up,
receiving, and placing in storage)
• Carrying Costs: Interest on capital
locked Storage, Insurance,
Obsolescence and Taxes
• Shortage Costs : Expenses involved to
meet the consumer demands ,
containment costs, crash procurement .
(various Short-Term and Long Term
repercussions on finance and other
functional areas.)
Economic
Order
Quantity(EOQ)
:

23. EOQ Model Assumptions
Assumptions :
– Demand for goods is known.
– Demand is consistent through out the period.
– Orders can be replenished immediately.
– There are two broad classification of costs.
– Cost per order is constant irrespective of size of order.
– Carrying cost can be expressed as the percentage of cost of
inventory.
F= Cost per Order, U = Annual Usage
Q = Quantity ordered, C= Percentage of Carrying Cost, P= Price Per Unit, TC
= Total Cost of Ordering and Carrying
Illustration : Given :
Annual Usage is 20000 units, Fixed Cost per Order = Rs 2000, . Purchase Price
per unit = RS 12, Carrying Cost = 25% of inventory value find EOQ.

24. EOQ Graphic Method
Annual Usage (U) units 20000
Quantity
Ordered
No.
Orde
rs/Ye
ar
Orderi
ng Cost
Carrying
Cost
Total
Cost
Cost Per Order (F) in Rs 2000 2500 8 16000 3750 19750
Price Per Unit(P) in Rs 12 3000 7 13333 4500 17833.33
Cost Per Order (C) % age 0.25 3500 6 11429 5250 16678.57
4000 5 10000 6000 16000
4500 4 8889 6750 15638.89
Economic Order Quantity 5163.978 5000 4 8000 7500 15500
Or EOQ=5,163
5500 4 7273 8250 15522.73
6000 3 6667 9000 15666.67
6500 3 6154 9750 15903.85
7000 3 5714 10500 16214.29
7500 3 5333 11250 16583.33
8000 3 5000 12000 17000
8500 2 4706 12750 17455.88
9000 2 4444 13500 17944.44
9500 2 4211 14250 18460.53
10000 2 4000 15000 19000

25. 0
5
10
15
20
25
30
35
40
45
50
2 3 4 5 6 7 8
CostsinRs000's
Quantity Ordered in 000' Units
Economic Order Quantity Ordering Cost
Carrying Cost
Total Cost

26. Inventory
Annual Usage (U) units 20000
(i)
Quantity
Ordered
(ii)
=
No.
Orders/Ye
ar
(iii)
=F× (ii)
Ordering
Cost
(iv) =
Carrying
Cost
(v)
=(iii)+(iv)
Total Cost
Cost Per Order (F) in Rs 1600 2500 8 12800 3750 16550
Price Per Unit(P) in Rs 12 3000 7 10667 4500 15166.67
Cost Per Order (C) Times 0.25 3500 6 9143 5250 14392.86
4000 5 8000 6000 14000
Economic Order Quantity 4618.8 4500 4 7111 6750 13861.11
5000 4 6400 7500 13900
5500 4 5818 8250 14068.18
6000 3 5333 9000 14333.33
6500 3 4923 9750 14673.08
7000 3 4571 10500 15071.43
7500 3 4267 11250 15516.67

27. 0
2
4
6
8
10
12
14
16
18
2 3 4 5 6 7 8
CostsinRs000's
Quantity Ordered in 000' Units
Economic Order Quantity
Ordering Cost
Carrying Cost
Total Cost

28. Levels of Inventory
Order Point / Re Order Level / Order Level expressed in Units
= Average Consumption x Lead time
Also Safety Stock + Normal Consumption
Safety Stock in Units :
(Maximum Usage – Average Usage) x Lead Time
ABC Analysis : Weightage of Value of Inventory
– A : High value, Stringent Control Measures
– B : Medium value, Moderate Control Measures
– C: Low Value, Minimum Control measures

29. Some Measures of Effectiveness of Inventory Management

30. Just in Time(JIT) Inventory Control : It means to produce the right units in
the right quantity at the right time or just-in-time.
Taichi Ohno (1970) of Japan Toyota Motors Corporation: JIT System, Or Zero Inventory
System, emphasizes on holding minimal level of inventory by relying on suppliers for
additives “Just-in-Time” to fulfill the demand.
The thrust of this technique is on identifying the issues in stock reduction and address the
needs, instead of pushing stock levels such that production is essential to consume stock.
JIT method attempts to check and overhaul the supply chain and assist the units in the chain,
ensuring benefits for all. Thus a 360 degree approach of curtailing unwanted investment in
stock is necessitated in JIT system. This method tries to minimize inventories through small
incremental discounts instead of prescribe precise strategies or methodologies. Insists on Pull
through rather than Push Through.
References for JIT
Hussein M. Reda(1987),A Review of “KANBAN”-The Japanese “Just-In-Time” Production System, Engineering
Management International, 4 (1987) 143-150.
Monden, Y., 1981. What makes the Toyota production system really tick? Ind. Eng., 13(l):(January): 36-46.
Monden, Y., 1981. Adaptable kanban system helps Toyota maintain just-in-time production. Ind. Eng., 13(5) (May): 29-45.
Monden, Y ., 1981. Smoothed production lets Toyota adapt to demand changes and reduce inventory. Ind. Eng., 13(8)
(August): 42-51.
Monden, Y., 1981. How Toyota shortened supply lot production time, waiting time and conveyance time. Ind. Eng., 13(9)
(September): 22-30.
Rice, J.W. and Yoshikawa, T., 1982. A comparison of kanban and MRP concepts for the control of repetitive
manufacturing systems. Prod. Inventory Manage., 23( 1): l-14.
What is this thing called Manufacturing Resource Planning? In : Proceedings APICS 23rd Annual Conference, Los
Angeles, CA, October 14-17, pp. 166-169.
Monden, Y., 1983. The Toyota Production System. IIE Press, Atlanta, GA.
Stoddard, W. and Rhea, N., 1985. Just-in-time manufacturing: The relentless pursuit of productivity. Modern Material
Handling Eng., 40(3) (March):70-76.

31. Just in Time
Management
Production
Methods
Smoothening
Production
Small Lot Sizes
Short Set-Up
Process Design
Multi Tasking
Work Force
Assignment of
Jobs
Standard Cycle
Time
Information
System
KANBAN
Withdrawal
Production
Other
Autonomation
(0 Defect Prodn.)
Bakayake
(System)
Yo-i-don
(Manual)
Source :
Hussein M. Reda(1987),A Review of “KANBAN”-The Japanese “Just-In-Time”
Production System, Engineering Management International, 4 (1987) 143-150.

32. Taichi Ohno father of JIT
Japanese JIT versus U.S. “typical” philosophy
Category JIT US system
Inventory Liability Asset
Lot Sizes Small (immediate Needs
Only)
Large, (Formulae for
optimum Size)
Set-Ups Short Not Critical
Lead Time Short Longer the Better
Quality Zero Defect Scrap tolerated
Vendors Co-Workers Adversaries
Managing Workers Management by Consensus Management by Decree
Source :
Goddard, W.E., (1983) Kanban versus MRP II -Which is best for you? Mod. Mater.
Handling.37(16) (November 5) .40-48.

33. Management of Cash and Marketable Securities
Need:
Transaction Motive
Precautionary Motive
Speculative Motive
Compensating Motive
Objective of Cash Management:
Minimise Funds Committed to Cash
Meeting Payment Schedules:
Prevent insolvency
Maintain relationship across the value chain
Availing discounts (Minimises Costs of Operations)
Credit rating
Favorable business opportunities
During contingencies

34. Factors Responsible for Cash requirement :
Synchronisation of Cash Flows
Short Costs
Excess Cash Balance
Procurement and Management
Uncertainty
Approaches to determine Cash Needs:
Minimising Cost of Cash
Baumol's Model
C= Optimal Cash Conversion amount per order. b=Cost of conversion per lot
T = Transaction Cost.
Miller-Orr Model
C= Total Cash Management costs, b =Fixed cost per conversion,
E(M) = Expected Average Daily Cash, E(N) =Expected number of conversions.
t= number of days in the period, i = Cost of Lost Opportunity

35. Determination of Cash
Orgler's Model: Involves opting for cash management with
appropriate integration of Cash management with production
and other functional areas.
Optimum cash strategy is determined by series of Multiple Linear
Programming divided into 3 parts.
i. Selection of Planning Horizon (Usually 1 year)
ii. Selection of Decision Variables
a) Payment Schedule
b) Short-Term Financing
c) Purchase and Sale of Marketable Securities
d) Cash Balance
iii. Formulation of Cash Management Strategy

36. Illustration Baumol's Model
Cash Needed during Plan
period (T)
1500000
Lot Size
(Market
Informat
ion)
No.
Lots
(T÷Lo
t Size)
Conversio
n Cost
Cost
(b× no of
Lots)
Opportun
ity Cost (
i× T)
Total
Cost
Conversion Cost Per Lot (b)
in Rs
30 24000 62.5 63 1875 960 2835.00
Interest rate Per Planning
Period (i) % age
0.08 26000 57.7 58 1731 1040 2770.77
C=Optimal Cash Conversion
Amount
33541.02 28000 53.6 54 1607 1120 2727.14
30000 50.0 50 1500 1200 2700.00
32000 46.9 47 1406 1280 2686.25
33541.02 44.7 45 1342 1341.641 2683.28
36000 41.7 42 1250 1440 2690.00
38000 39.5 39 1184 1520 2704.21
40000 37.5 38 1125 1600 2725.00
42000 35.7 36 1071 1680 2751.43
24000 62.5 63 1875 960 2835.00
26000 57.7 58 1731 1040 2770.77
28000 53.6 54 1607 1120 2727.14

37. 0
500
1000
1500
2000
2500
3000
3500
20 25 30 35 40 45 50 55 60 65 70
ConversionCostsinRs
Amount Demanded per Lot in Rs Thousands
Baumol's Optimum Conversion Amount
Conversion Cost Cost
(b× no of Lots)
Opportunity Cost
(i× T)
Total Cost

38. Stochastic Cash Model by Miller Orr
Assumptions :
• Cash demand Fluctuates over a period of time
• Include variance = s2 of cash demand over a decision period.
• b= Fixed transaction cost
• s2= Variance of Cash flows
• K = Opportunity Cost
• Enter market for buying or selling
Marketable Securities based on the
existing cash balance H or L points
to optimize returns on Cash Balance

39. Cash Fluctuation and Limits

40. Miller Orr Model
Annual Cash Required in Rs (T) 1500000
Conversion Cost Per Lot in Rs (b) 30
0
Interest Lost % age (i) 0.08
0
Annual variance r 27000
Optimal Conversion Amount Per Order z = 36224.30

41. Swadeshi Manufacturing Company has a cash balance of Rs
27,000 at the beginning of March 2013. Considering the
following additional information you are required to prepare
cash budget for March, April, and May 2013.
Additional Information:
a) Creditors allow one month Credit
b) Salaries are paid in the current month. Fixed costs are
paid one month in arrears and include a charge for
depreciation of Rs 5,000 per month. Credit sales are
settled as follows: 40% in month of Sales, 45% in next
month and 12% in the following month. The balance
represents bad debts.
c) Table of Transactions is as follows

42. Month Cash
Sales
Credit
Sales
Purchases Salaries Fixed
Overhead
January --- 74000 55200 9000 30000
February ---- 82000 61200 9000 30000
March 20000 80000 60000 9500 30000
April 22000 90000 69000 9500 32000
May 25000 100000 75000 10000 32000

43. Solution
A. Working Notes on Debtors Recovery for the budget
Period
• Fixed overheads:
• March for Feb 30,000- Depreciation 5000 = 25,000
• April for March 30,000- Depreciation 5000 = 25,000
• May for April 32,000- Depreciation 5000 =27,000
March April May
40% March
Sales(80000)
32,000 40% 0f April
Sales(90000)
36,000 40% of May
sales (100000)
40,000
45% of Feb
Sales(82000)
36,900 45% of March
sales(80000)
36,000 45% of April
Sales (90000)
40,500
12% of
January
Sales(74000)
8,880 12% of Feb
(82000)
9,840 12% 0f March
Sales(80000)
9,600
Total Monthly 77,780 81,840 90,100

44. Cash Budget for the period March – May 2013
Particulars March April May
Opening Balance 27,000 29080 38420
Receipts from Debtors 77,780 81840 90100
Cash Sales 20,000 22000 25000
Total Cash Available 1,24,780 132920 153,520
Payments
Salaries 9500 9500 10000
Fixed Overheads 25000*
25000*
27000*
Purchases 61,200 60,000 69,000
Total Payments 95,700 94,500 1,06,000
Closing Balance 29080 38,420 47,520