To develop the cash budget for cash flow for the month of January and February, the beginning cash balances, the cash receipts, the cash payments and financing of the program where applicable are all taken into account. Let us examine how this can be done in sequence.

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Step $1$: Ending Cash Balance

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The beginning cash balance refers to the amount of money that will be used as the base for the budget for that month. Edge Soccer Program commences the month of January with an amount of $10,500$ US dollars in cash.

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January: $$10,500$

February: The balance of January will be the opening balance of February and this is what we will get to later on$.$

Step $2$: Cash Receipts

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Cash receipts are of two forms.

Cash that comes from clients

The note that has been issued and requires payment

January Receipts:

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Collections from customers, January$$s cash inflows are expected to reach $$11,000.$

Collection of note receivable from a recognized football club: $$8,500.$

Total amount of cash received in January $=$$$11,000+$$$8,500=$$$19,500.$

February Receipts:

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Collections from customers activity within February is projected to reach $$15,200.$

No Collection of a note receivable is however anticipated for the month of February.

Total receipts for February $=$ $$15,200$

Explanation:

Edge Soccer Program earns cash through direct customers purchase as well as through the notes receivable on some occasions. For the month of January, they hope to generate $$19,500$ while for the month of February the amount expected is $$15,200$ and this amount will Source from customer payments only.

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Step $2$

Step $3$: Cash Payments

There are two main types of cash payments:

Equipment purchases

Operating costs $($selling and administrative expenses$)$

January Payments:

Equipment purchases for January are budgeted to be $$15,600.$

Operating costs for January are $$2,900.$

Total payments for January $=$$$15,600+$$$2,900=$$$18,500$

February Payments:

Equipment purchases for February are budgeted to be $$14,800.$

Operating costs for February are $$2,900.$

Total payments for February $=$$$14,800+$$$2,900=$$$17,700$

Step $4$: Ending Cash Balance Before Financing

We now calculate the cash available after receipts and subtract the cash payments to determine the cash balance before any financing.

January Ending Cash Balance:

Beginning cash balance $=$ $$10,500$

Plus: Cash receipts $=$ $$19,500$

Cash available $=$$$10,500+$$$19,500=$$$30,000$

Less: Cash payments $=$ $$18,500$

Ending cash balance before financing $=$$$30,000$$$18,500=$$$11,500$

Since the ending cash balance of $$11,500$ is above the minimum desired cash balance of $$10,000,$ no borrowing is required in January.

February Ending Cash Balance:

Beginning cash balance $=$ $$11,500($from January$)$

Plus: Cash receipts $=$ $$15,200$

Cash available $=$$$11,500+$$$15,200=$$$26,700$

Less: Cash payments $=$ $$17,700$

Ending cash balance before financing $=$$$26,700$$$17,700=$$$9,000$

Explanation:

Since the ending cash balance of $$9,000$ is below the minimum desired cash balance of $$10,000,$ Edge will need to borrow funds from the bank. The bank extends credit in multiples of $$1,000.$ Therefore, Edge will borrow $$1,000$ in February to bring the cash balance up to the minimum level.

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Step $3$

Step $5$: Financing

Since Edge must maintain a minimum cash balance of $$10,000,$ and the cash balance for February is projected to be below that, Edge will need to borrow from the bank in February.

Borrowing in February: $$1,000$

Step $6$: Ending Cash Balance After Financing

Now, we calculate the ending cash balance after financing.

January Ending Cash Balance After Financing:

Since no financing is needed, the ending cash balance remains $$11,500.$

February Ending Cash Balance After Financing:

Ending cash balance before financing $=$ $$9,000$

Plus: Borrowing $=$ $$1,000$

Ending cash balance after financing $=$$$9,000+$$$1,000=$$$10,000$

Explanation:

Edge Soccer doesn't need to borrow in January because their cash balance is above the minimum. In February, they borrow $$1,000$ to bring their balance up to the required $$10,000$ minimum

$-$brief explanation of the budget just like what you should do if you were in a meeting with senior management and you were the accountant who was tasked with presenting the budget