Accounting Business Reporting for Decision Making

396 Accounting: Business Reporting for Decision Making

January February March

Credit sales

Purchase of raw materials

Manufacturing labour

Overhead (including $1500

per month depreciation)

Warehousing and distribution

expenses

Sales and marketing expenses

Administrative expenses

(incl. $500 per month

depreciation)

Loan — principal

Loan interest expense

Dividend paid

$ 130 000

52 000

20 000

8 000

4 000

5 600

3 750

$ 110 000

44 000

16 500

6 600

7 000

4 900

3 500

8 750

$ 100 000

40 000

15 000

6 000

9 900

3 800

3 000

4 500

85 000

Additional information

•   Past experience suggests that accounts receivable usually settle accounts according to the following

pattern:

• 50 per cent in the month following the sale


• 40 per cent in the second month following the sale


• 10 per cent in the third month following the sale.
  • Actual sales for the last three months of 2018 were as follows:


• $210 000 in October


• $282 000 in November


• $303 000 in December.
  • Coconut Plantations pay their suppliers of raw materials in the month after purchase. Actual
  purchases in December were $120 000.
  As bad debts have not been an issue for Coconut Plantations, it is expected that all customers will
  pay their monies owing.
  • The distribution-related expenses for March include an amount of $2300 that will not be paid until April.
  • The marketing expenses for March include an amount of $4200 paid for advertising to be conducted
  in April.
  • The loan interest expense will not be paid until April 2019.
  For an entity that provides goods or services on credit, one of the main tasks in the preparation of a
  cash budget is calculating the cash receipts from the credit sales or fees generated. This is commonly
  shown in a schedule of receipts from accounts receivable (debtors).
  Step 3: Prepare a schedule of receipts from accounts receivable and other sub-budgets.

Receipts

Month Sales/fees January February March

October (actual)

November (actual)

December (actual)

January

February

March

$ 210 000

282 000

303 000

130 000

110 000

100 000

$21 000

($210 000 × 10%

112 800

($282 000 × 40%

151 500

($303 000 × 50%

—

—

—

)

)

)

—

$28 200

($282 000 × 10%

121 200

($303 000 × 40%

65 000

($130 000 × 50%

—

— 

)

)

)

—

$30 300

($303 000 × 10%

52 000

($130 000 × 40%

55 000

($110 000 × 50%

—

)

)

)

Total $285 300 $214 400 $137 300

Totals are transferred to the cash budget

(continued)