Question 4

a)Underline the main components which are considered while preparing a budget in a

Company. What are the major considerations business owners should make as they budget and forecast ?

b)Prepare Cash budget for the Quarter April To June based on the following data and additional information.

MonthSales($)Purchase($)Wages($)Overheads($)

Jan60,00036,0009,00010,000

Feb62,00038,0008,0009,500

Mar64,00033,00010,00011,500

Apr58,00035,0008,5009,000

May56,00039,0009,0009,500

Jun60,00034,0008,0009,000

Additional Information :

1.Cash balance at 1^st April is $800,000

2.Sales is 40% cash sales and 60% is collected in the following month.

3.All purchases of a month are paid after 2 months.

4.Land was purchased in April for $85,000

5.Wages of a month are paid the following month. All overheads are paid the same month.

6.Loan repaid in May $16,000

7.Dividend of $75,000 is expected to be received in May.