Merchandise Purchase Budget

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:

Table of Contents

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

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

Budgeted 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

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

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MBA,BBA.

I am Smirti Bam, an enthusiastic edu blogger with a passion for sharing insights into the dynamic world of business and management through this website.

I hold a MBA degree from Presidential Business School, Kathmandu, and a BBA degree with a specialization in Finance from Apex College,

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Merchandise Purchase Budget – Cash Budget | Budgeted Income Statement and Balance sheet