he following information pertains to Omega Projects Ltd for the three months ended 31 December 2020. Actual Budgeted October November December Revenue (20% for cash and 80% on credit) R360 000 R380 000 R400 000 Purchases (10% for cash 90% on credit) R240 000 R280 000 R320 000 Salaries and wages paid R40 000 R60 000 R60 000 Cash expenses R24 000 R28 000 R32 000 Depreciation R2 000 R2 000 R2 000 Additional information: 1. It is expected that debtors will settle their accounts as follows: • 20% in the month of invoice • 70% in the month after the month of invoice, and • 5% in the second month after the month of invoice. • The remaining 5% is usually written off as bad debts. 2. Trade creditors are paid in the month after the purchases at a discount of 5%. 3. 50% of the salaries and wages are weekly wages. Because wages are paid weekly, usually 10% of the wages are paid in the month following the month in which they were incurred. 4. Expenses are paid as they arise. 5. The favourable bank balance on 1 November 2020 was R 16 000. Required: 1.1 Prepare the cash budget for November and December 2020. 1.2 Discuss how the budgeting process in an organisation benefits a functioning standard costing system.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
The following information pertains to Omega Projects Ltd for the three months ended 31 December 2020.
Actual Budgeted
October November December
Revenue (20% for cash and 80% on credit) R360 000 R380 000 R400 000
Purchases (10% for cash 90% on credit) R240 000 R280 000 R320 000
Salaries and wages paid R40 000 R60 000 R60 000
Cash expenses R24 000 R28 000 R32 000
Additional information:
1. It is expected that debtors will settle their accounts as follows:
• 20% in the month of invoice
• 70% in the month after the month of invoice, and
• 5% in the second month after the month of invoice.
• The remaining 5% is usually written off as
2. Trade creditors are paid in the month after the purchases at a discount of 5%.
3. 50% of the salaries and wages are weekly wages. Because wages are paid weekly,
usually 10% of the wages are paid in the month following the month in which they were incurred.
4. Expenses are paid as they arise.
5. The favourable bank balance on 1 November 2020 was R 16 000.
Required:
1.1 Prepare the
1.2 Discuss how the budgeting process in an organisation benefits a
functioning
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