Question 2 A. Polly Ltd has a division in Pinky Island and the Finance manager has approached to you assist them in developing a cash budget for a period of three months from September to November 2020. The company's activities are planned as follows: 1. Planned sales for August, September, October and November 2020 are $280,000, $300,000, $340,000 and $380,000. 2. 40% of sales are on a cash basis while the remaining sales are on credit and 60% is collected one month after sale. 3. The company's purchases are 60% of sales. Purchases are made one month prior to sales, with payments made in the month following the purchase. 4. The bank balance on at 31 August 2020 is expected to be $80,000. 5. Fixed salaries cost the company $6,800 per month. 6. $90,000 worth of Office Furniture is expected to be bought and paid for at the end of November 2020. Total NOTE: Copy the cash budget format into your answer sheet. Polly Ltd Cash budget from September to November 2020: September October November Cash receipts: $ $ $ Total sales (for reference only) Cash sales (40% of Total sales) Collection from credit customers: 60% in the month following sales Total Receipts Cash Payments: Purchases - 60% of total sales Fixed salaries Purchase of Office Furniture Total Payments Surplus/(Deficit) for the month Cash balance, at start of month Cash balance, at end of month Required Prepare the monthly cash budget for the period of three months ending November 2020 for Polly Ltd's Pinky Island. [15 marks] B. Explain two (2) benefits which would result from the introduction of a budgeting system by a company. [5 marks] [Total: 20 marks]