Discuss the advantages of preparing a cash budget and the challenges a management accountant faces in...

 

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Discuss the advantages of preparing a cash budget and the challenges a management accountant faces in the process of forecasting cash inflows and outflows. (10 marks) A Government Institute has provided the following information for Quarter 3 running from January to March 2022. 1. The institute expects a release for a quarter of Shs 5 billion from the Central Government at the beginning of January. 2. The total monthly wage for the employees is 800million paid in the following month. 3. The Institute has two main construction projects running, construction of the main Hall and tarmacking the Walk Ways. The contractor of the main hall has an amount due of Shs 340million of which 50% is payable in January, 30% in February and 20% in March. The Walkways contractor has balance of Shs 80 million payable in January, February and March as follows. 40% in January, 30% in Feb and 30% in March. 4. From Quarter 2, the outstanding balance due to suppliers is 740 million. 40% of this balance is payable in January and 20% in March. The supply of consumables in Quarter 3 is expected to total to Shs 650million of which 80% is payable in March 2022 and the balance is payable in April 2022. 5. A loan repayment of Shs 300 million is expected in March. 6. A new vehicle is expected to be purchased for the CEO of Shs 150million in February. 7. Disposal of old vehicles and furniture is expected to take place in January. A collection of Shs 23,400,000 is expected in March. 8. Non-current assets depreciate by Shs 200million monthly. 9. The Pay as You Eam (PAYE) and NSSF obligations are shown below; Nov 2021 PAYE 202 Dec 2021 201 Jan 2022 203 Feb 2022 210 Million Million Million Million Oct 2021 Nov2021 Dec Jan 2022 NSSF 73 70 Million 72 75.8 Million Million Million March 2022 215 Million Feb 2022 74.8 Million The PAYE is remitted to Uganda Revenue Authority in the following month while NSSF is payable after two months. Required: Prepare a cash budget for the Quarter January to March 2022 and advise the Finance Officer based on the cash position of the prepared budget (15marks) (Total: 25marks) Discuss the advantages of preparing a cash budget and the challenges a management accountant faces in the process of forecasting cash inflows and outflows. (10 marks) A Government Institute has provided the following information for Quarter 3 running from January to March 2022. 1. The institute expects a release for a quarter of Shs 5 billion from the Central Government at the beginning of January. 2. The total monthly wage for the employees is 800million paid in the following month. 3. The Institute has two main construction projects running, construction of the main Hall and tarmacking the Walk Ways. The contractor of the main hall has an amount due of Shs 340million of which 50% is payable in January, 30% in February and 20% in March. The Walkways contractor has balance of Shs 80 million payable in January, February and March as follows. 40% in January, 30% in Feb and 30% in March. 4. From Quarter 2, the outstanding balance due to suppliers is 740 million. 40% of this balance is payable in January and 20% in March. The supply of consumables in Quarter 3 is expected to total to Shs 650million of which 80% is payable in March 2022 and the balance is payable in April 2022. 5. A loan repayment of Shs 300 million is expected in March. 6. A new vehicle is expected to be purchased for the CEO of Shs 150million in February. 7. Disposal of old vehicles and furniture is expected to take place in January. A collection of Shs 23,400,000 is expected in March. 8. Non-current assets depreciate by Shs 200million monthly. 9. The Pay as You Eam (PAYE) and NSSF obligations are shown below; Nov 2021 PAYE 202 Dec 2021 201 Jan 2022 203 Feb 2022 210 Million Million Million Million Oct 2021 Nov2021 Dec Jan 2022 NSSF 73 70 Million 72 75.8 Million Million Million March 2022 215 Million Feb 2022 74.8 Million The PAYE is remitted to Uganda Revenue Authority in the following month while NSSF is payable after two months. Required: Prepare a cash budget for the Quarter January to March 2022 and advise the Finance Officer based on the cash position of the prepared budget (15marks) (Total: 25marks)

Answer rating: 100% (QA)

Answer Advantages of preparing a cash budget Better Cash Management A cash budget allows a business to plan and manage its cash flow effectively By forecasting cash inflows and outflows the organizati... View the full answer