Page 412 - F1 Integrated Workbook STUDENT 2018

Chapter 24

4.2 The cash budget and cash flow forecast

A cash forecast is an estimate of cash receipts and payments for a future period
under existing conditions.

A cash budget is a commitment to a plan for cash receipts and payments for a
future period after taking any action necessary to bring the forecast into line with the
overall business plan.

Cash budgets are used to:

 assess and integrate operating budgets

 plan for cash shortages and surpluses

 compare with actual spending.

There are two different techniques that can be used to create a cash budget.

 A receipts and payments forecast.

 A statement of financial position forecast.

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