The following information pertains to Omega Projects Ltd for the three months ended 31 December 2020.Actual Budgeted OctoberNovemberDecemberRRRRevenue (20% for cash and 80% on credit)360 000380 000400 000Purchases (10% for cash 90% on credit)240 000280 000320 000Salaries and wages paid40 00060 00060 000Cash expenses24 00028 00032 000Depreciation2 0002 0002 000 Additional information:It is expected that debtors will settle their accounts as follows:20% in the month of invoice70% in the month after the month of invoice, and5% in the second month after the month ofThe remaining 5% is usually written off as bad Trade creditors are paid in the month after the purchases at a discount of 5%.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 wereExpenses are paid as they arise.The favourable bank balance on 1 November 2020 was R 16 Required:Prepare the cash budget for November and December (20) (Note: Student can type answers without the use of tables, make sure work is aligned)Discuss how the budgeting process in an organisation benefits a functioning standard costing system.

Particulars November December Opening balance Receipts: -…

Answered: Revenue (20% for cash and 80% on…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Actual Budgeted

	October	November	December
R	R	R
Revenue (20% for cash and 80% on credit)	360 000	380 000	400 000
Purchases (10% for cash 90% on credit)	240 000	280 000	320 000
Salaries and wages paid	40 000	60 000	60 000
Cash expenses	24 000	28 000	32 000
Depreciation	2 000	2 000	2 000

Additional information:

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
- The remaining 5% is usually written off as bad

Trade creditors are paid in the month after the purchases at a discount of 5%.
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
Expenses are paid as they arise.
The favourable bank balance on 1 November 2020 was R 16

Required:

Prepare the cash budget for November and December (20) (Note: Student can type answers without the use of tables, make sure work is aligned)
Discuss how the budgeting process in an organisation benefits a functioning standard costing system.

Definition Definition Estimate of an organization's cash flow for a future period. A cash budget forecasts future cash receipts and payments from various sources for a fiscal year. A cash budget can be created once a month or once a week to determine the organization's cash position and ensure its performance in relation to the budget. It aids in determining whether the company has enough cash and cash equivalents to meet its operational needs in the future.

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