Merchandise Purchase Budget , Cash Budget, Budgeted Income Statement and Balance sheet | Managerial Accounting

April 21, 2017 | Home » Merchandise Purchase Budget , Cash Budget, Budgeted Income Statement and Balance sheet | Managerial Accounting

Merchandise Purchase Budget
Cash Budget
Budgeted Income Statement
Balance sheet
BBA | BBA-BI
Managerial Accounting

The Nepal Ware House Pvt.Ltd. has collected the following information to prepare Master Budget.

Equities and Liabilities Rs. Assets Rs.
Equity 150,000 Merchandise inventory 100000
10% debenture 20000 Account receivable:
November sales           16000
December                    60000 76000
Retained earnings 26000 Cash at bank 20000
Total 196000 196000

 Sales would be 20% in cash and 80% on credit. Credit sales would be realized 50% in the month of sales, 30% in the next month; 20% in the following next month of sales. All expenses including purchases would be paid in the same month of expenses and purchases. Gross profit margin would be 50% on sales and administrative and distribution expenses would be 10% of gross sales.

Sufficient merchandise inventory would be maintained to meet next month’s sales need. The company would desire to have minimum cash balance of Rs.20000. The 10% debenture would retire on January 1st,2014 and payable at a premium of 10%.Short term loan in a multiple of Rs.10000 would be available at on interest rate of 10% p.a to meet cash deficiency.Repayment of bank loan would be in a multiple of Rs. 1000. The interest will be paid at the time or repayment on the amount of loan.

Required:
a) Merchandise purchase budget for the first three month.
b) Cash collection and disbursement budget for the first three month.
c) Budgeted income statement and balance sheet at the end of March 31st 2014.

Solution:

a. Merchandise Purchase Budget

Details Merchandise Need Ending Inventory Total Need Beginning Inventory Purchase
Month
Jan 100000 150000 250000 100000 150000
Feb 150000 175000 325000 150000 175000
Mar 175000 150000 325000 175000 150000
Total 425000 150000 575000 100000 475000
April 150000

b. Cash Budget

  Particulars Jan  Feb Mar
Beginning Balance of Cash 20000 20000 46666.67
Add: Cash Receipts and Collection
Cash Sales 40000 60000 70000
Collection from same month sales 80000 120000 140000
Collection from previous month sales 36000 48000 72000
Collection from previous two month sales 16000 24000 32000
Total Cah Receipt 172000 252000 314000
Total Cash Available 192000 272000 360666.67
Less: Cash Payment/ Needed
Payment of Accounts Payable 150000 175000 150000
Admin and distribution expenses 20,000 30000 35000
Redemption of debenture with premium 22000
Total Cash Payment 192,000 205,000 185,000
Minimum Cash Balance 20000 20000 20000
Total Cash Needed 212,000 225,000 205,000
Surplus/Deficit -20000 47000 155,666.67
Borrowing 20000
Repayment
Principal 20000
Interest 333.3333
Ending Balance of Cash 20000 46666.67 175,666.67

c. Income Statement

  Particulars Amount  Amount
Sales Revenue(3months ie; Jan+Feb+Mar) 850000
Less: Cost of Goods Sold
Beginning Inventory(Jan) 100000
Add: Purchases(Jan+Feb+Mar) 475000
Less:Ending Inventory(Mar) 150000 425000
Gross Profit 425000
Less: Operating and other expenses
Administrative expenses 85000
Interest Expenses 333.333
Premium on debenture 2000 87333.333
Net Profit Before Tax   337666.667

c. Balance Sheet

Assets Amount(Rs)
Account Receivable 188000
Inventory of Merchandise 150000
Cash Balance 175666.67
Total Assets 513666.67
Liabilities and Owners’ Equity Amount(Rs)
Share Capital 150000
Retained Earnings[26000+337666.67] 363666.67
Total Liabilities and Owners’ Equity 513666.67

Category : BBA, BBA-BI
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