Page 112 - BA2 Integrated Workbook STUDENT 2018

Chapter 6

4.3 Preparing a cash budget

There is no definitive format which should be used for a cash budget. However, it
should include:

 A clear distinction between the cash receipts and cash payments for each
period and a subtotal clearly shown for each.

 A figure for the net cash flow for each period.

 The closing cash balance for each period.

 Only include cash flows – remember items such as depreciation are
not cash flows.

 Allowance must be made for bad and doubtful debts – bad debts will
never be received, and doubtful debts may not be received. When
you are forecasting the cash receipts from customers you must
remember to adjust for these items.

 Include all cash flows – the cash budget does not just reflect sales
revenue and production costs, but all movements of cash including
cash flows for financial items such as inflows from the sale of shares
or grants received and outflows such as the purchase of a non-
current asset or the repayment of a loan.

Illustrations and further practice

Go over illustration 2 then TYU 2

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