Page 39 - Cost Accounting - Ready Reckoner

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2. Production Budget:

Production of finished goods is based on demand for the product. This budget
facilitates estimating the production of a product in units and its production cost.

Production budget is prepared as,

Particulars Amount(₹)
Sales/Demand for the product xxxx
Add: Closing stock of finished goods xxx
Less: Opening stock of finished goods xxx
Production (in units) xxxx
X unit cost of production xx
Production Cost (in value) xxxx

3. Cash Budget:

An estimate of cash requirement or the balance of cash to be maintained for a period
is estimated by preparing a Cash budget.

Cash budget preparation does not make a distinction between capital or revenue
nature of a transaction.

Cash available is used to make cash payments and the netted out balance is available
for the next period.

Cash budget is prepared as,

Particulars Amount(₹)
Opening cash balance xxxx
Add: Receipts xxx
Less: Payments xxx
Closing cash balance xxxx

When an expenditure is outstanding, for example if in a sum wages outstanding
is 1/4. It means 3/4 of the amount is paid in the same month and 1/4 is paid in next
th
th
month. (i.e) the fraction outstanding is considered as paid the next month.
Collections from debtors and payment to suppliers are made in respective
months based on credit period offered.

If in a month cash available is not sufficient to make payments, closing balance
turns negative and overdraft can be arranged.