Page 159 - P1 Integrated Workbook STUDENT 2018

Budgeting

2.3 Cash budgets

This is a forecast of cash receipts and payments based on predictions of sales
and cost of sales and the timings of the cash flows relating to these items.

Cash budgets are used to:

 assess and integrate operating budgets

 plan for cash shortages and surpluses

 compare with actual spending.

Calculating receipts and payments

Cash receipts = Sales + brought forward receivables – carried forward
receivables

Cash payments = Purchases + brought forward payables – carried forward
payables

Receipts from customers and payments to suppliers are common questions as they
require the accounting/income statement figures to be adjusted due to timing
differences caused by giving or taking credit.

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