Question 4: (10 marks)

Explain the difference between profit and cash. Use information in the cash budget (Appendix B) and the income statement (Appendix D), respectively, to illustrate the difference. (10 marks)

Appendix B: Cash Budget for James Freeman and Family Enterprise for the year 2020

	Q1	Q2	Q3	Q4	Total
RECEIPTS (INFLOWS):
CASH SALE (60%)	60,000	72,000	120,000	180,000	432,000
1 MONTH CREDIT SALES (40%)	40,000	40,000	48,000	80,000	208,000
ADDITIONAL CAPITAL	40,000	-	-	-	40,000
TOTAL INFLOWS	140,000	112,000	168,000	260,000	680,000
PAYMENTS (OUTFLOWS):
PURCHASES	40,000	50,000	90,000	120,000	300,000
PURCHASE OF EQUIPMENT	180,000	-	-	-	180,000
ADMIN.	5,000	5,000	6,000	10,000	26,000
WAGES / SALARIES	10,000	12,000	14,000	16,000	52,000
TOTAL OUTFLOWS	235,000	67,000	110,000	146,000	558,000
NET CASH FLOW [SURPLUS/(DEFICIT)]	(95,000)	45,000	58,000	114,000	122,000
OPENING BALANCE	35,000	(60,000)	(15,000)	43,000	35,000
CLOSING BALANCE	(60,000)	(15,000)	43,000	157,000	157,000

Appendix D: Income Statement of Janet Zhang for the period ended 31^st December 2019

Net Sales: Sales Sales returns LESS: Cost of sales: Opening inventory Purchases Carriage in Purchases returns LESS: Closing inventory Gross Profit Add: Other incomes: . LESS: Expenses: Carriage out Salaries & Wages Rent & Rates Insurance Motor expenses Telephone Electricity General expenses	14,208 71,244 1,860 (2,6 02) 84,710 (18,000) 0 1,200 22,640 1,824 1,000 2,856 2,624 996 1,884	111,600 (1,500) 110,100 (66,710) 43,390 0 43,390 (35,024)
Net Profit		8,366