Practical Examples / Proforma and Examples of Cash Budget

Proforma of Cash Budget

Before starting with practical examples one should understand what is cash budget and why it is needed. Below given proforma will help to understand cash budget structure and develop basic understanding of cash budget. It is suggested that you must remember this format of cash budget to make calculations easy for you.

CASH BUDGET
of ___’three’___ months from __’Month1′__ to __’Month3′___

PARTICULARS	Month_1	Month_2	Month_3
Opening Cash Balance Add: – RECEIPTS Cash Sales Collection From Debtors Receipts From Bills Receivable Interest & Dividend Sale of Fixed Asset Receipts From Shares Issued Receipts from Loan, Debentures etc. Other Receipts TOTAL RECEIPTS (A) Less: – PAYMENTS Cash Purchase Payment To Creditors Wages & Salaries Administrative Expenses Selling Expenses Purchase of Fixed Asset Payment of Taxes Other Payments TOTAL PAYMENTS (B) CLOSING CASH BALANCE (A -B)

Sometime business needs to borrow funds to maintain minimum opening balance on the beginning of each month. To satisfy daily business transaction needs. In that firm can borrow fund by raising debt after closing of the particular month. For example,0 CGP ltd has policy, They maintain opening balance of 1,00,000 ₹ at the beginning of each month. If in June, closing balance is 90,000 ₹ then CGP Ltd will borrow 10,000 ₹ through debt fund which will be added in closing balance of June and CGP Ltd will now have 1,00,000 RS as opening balance of July.

Question 1

Safiya Ltd. Furnished the following information prepare cash budget for the three months from April to June 2025. Cash & bank on balance on 1-4-2025 Rs.60000.

Month	Total Sales	Purchases	Wages	Overhead Exp
February	600000	300000	120000	112500
March	450000	270000	108000	97500
April	650000	330000	144000	127500
May	900000	480000	150000	142500
June	500000	240000	126000	112500

 Other information:

1. Assume 40% of total sales are cash sales and 60% credit sales.
2. 50% of credit sales are realized in the month following sales and remaining 50% in the next month following.
3. The period of credit allowed by supplier is one month.
4. Overhead exp. Include Rs.22500 for depreciation on fixed assets.
5. The time lag in payment of overhead expense is ½ month and Time lag in payment of wages is ¼ month.
6. In June 2025 Debenture interest of Rs.37500 is to be paid.

Solution,

Cash Budget of Safiya Ltd
From April to June, 2025

Particulars	April	May	June
Opening Balance	60,000	1,40,000	2,39,000
Add: Receipts
Cash Sales	2,60,000	3,60,000	2,00,000
Credit Sales (Previous Months)	3,15,000	3,30,000	4,65,000
Total Receipts(A)	6,35,000	8,30,000	9,04,000
Less: Payments
Purchases	2,70,000	3,30,000	4,80,000
Wages	1,35,000	1,48,500	1,32,000
Overheads (excluding depreciation)	90,000	1,12,500	1,05,000
Debenture Interest	0	0	37,500
Total Payments(B)	4,95,000	5,91,000	7,54,500
Closing Balance (A-B)	1,40,000	2,39,000	1,49,500

Working Note: 1: Calculation of Sales

Month	Total Sales	Cash (40%)	Credit (60%)
February	600000	240000	360000
March	450000	180000	270000
April	650000	260000	390000
May	900000	360000	540000
June	500000	200000	300000

Calculation of Credit Sales
Month	Credit (60%)	February	March	April	May	June
February	360000		180000	180000
March	270000			135000	135000
April	390000				195000	195000
May	540000					270000
June	300000
				315000	330000	465000

Working Note: 2: Calculation of Purchase

Month	Purchases	1 Month Credit Period
February	300000	March
March	270000	April
April	330000	May
May	480000	June
June	240000	July

Working Note: 3: Calculation of Overhead

Month	Overhead Exp.	Less Depreciation	OH after Dep.
February	112500	22500	90000
March	97500	22500	75000
April	127500	22500	105000
May	142500	22500	120000
June	112500	22500	90000

Month	Overhead Exp after Dep.	February	March	April	May	June
February	90000	45000	45000
March	75000		37500	37500
April	105000			52500	52500
May	120000				60000	60000
June	90000					45000
		45000	82500	90000	112500	105000

Note: Depreciation is non-cash expense hence not included in cash budget

Working Note: 4: Calculation of Wages

Month	Wages	February	March	April	May	June
February	120000	90000	30000
March	108000		81000	27000
April	144000			108000	36000
May	150000				112500	37500
June	126000					94500
				135000	148500	132000

Question 2

From the following details of Keya Limited prepare cash budget from April to June 2022.

Month	Sales	Purchase	Wages	Fixed ohs.	Variable ohs.
Feb	400000	180000	60000	25000	40000
March	540000	240000	80000	25000	56000
April	600000	270000	90000	25000	60000
May	550000	250000	84000	25000	56000
June	620000	280000	94000	25000	62000

1. Estimated cash balance on 1-4-2022 was Rs.70000

Other information:

1. Sales: 25% cash, 75% credit (credit period allowed to customers 1 month)
2. Purchases: 20% cash, 80% credit (credit period allowed by suppliers 2 month)
3. Time lag: wages- ½ month, variable overhead- ¼ month
4. Dividend amount likely to be received in the month of June is Rs. 30000. Monthly fixed overheads include depreciation of Rs. 5000

Solution

Cash Budget of Keya Limited
From April to June, 2012

Particulars	April	May	June
Opening Balance	70,000	2,63,000	4,44,500
Add: Receipts
Cash Sales	1,50,000	1,37,500	1,55,000
Credit Sales	4,05,000	4,50,000	4,12,500
Total Receipts(A)	6,25,000	8,50,500	10,12,000
Less: Payments
Cash Purchases	54,000	50,000	56,000
Credit Purchases	1,44,000	1,92,000	2,16,000
Wages	85,000	87,000	89,000
Fixed Overheads (excluding depreciation)	20,000	20,000	20,000
Variable Overhead	59000	57000	60,500
Total Payments(B)	3,62,000	4,06,000	4,41,500
Closing Balance(A-B)	2,63,000	4,44,500	5,70,500

WN:1 Calculation of Sales

Month	Total Sales	Cash (25%)	Credit (75%)	1 Month Credit
February	400000	100000	300000	March
March	540000	135000	405000	April
April	600000	150000	450000	May
May	550000	137500	412500	June
June	620000	155000	465000	July

Working Note: 2 Calculation of Purchases

Month	Purchases	Cash (20%)	Credit (80%)	2 month credit
February	180000	36000	144000	April
March	240000	48000	192000	May
April	270000	54000	216000	June
May	250000	50000	200000	July
June	280000	56000	224000	August

Working Note:3 Calculation of Wages

Month	Wages	February	March	April	May	June
February	60000	30000	30000
March	80000		40000	40000
April	90000			45000	45000
May	84000				42000	42000
June	94000					47000
		30000	70000	85000	87000	89000

Working Note: 4 Calculation of Fixed Overhead

Month	Fixed Overhead	Less Depriciation	Fixed OH after Depriciation
February	25000	5000	20000
March	25000	5000	20000
April	25000	5000	20000
May	25000	5000	20000
June	25000	5000	20000

Working Note: 5 Calculation of Variable Overhead

Month	Variable OH	February	March	April	May	June
February	40000	30000	10000
March	56000		42000	14000
April	60000			45000	15000
May	56000				42000	14000
June	62000					46500
				59000	57000	60500

Question 3

Prepare a cash budget for three months ending, 31″ May, 2021 from the following information of Swayam Limited

Month	Total Sales	Total purchase	Wages	Factory Oh	Sales & Distribution Oh
January	40000	40000	8000	6400	1600
February	44000	28000	8800	6600	1800
March	56000	28000	9200	6800	1800
April	72000	64000	9200	7000	2000
May	60000	40000	8000	6400	1800

 Additional Information:

1. Cash balance as on 1st March, 2021 Rs. 30,000.
2. 50% of total sales are on credit sales and purchases are all on credit terms.
3. The rate of commission on total sales is 5% the payment on next month
4. Second installment of shares Rs.20,000 and security premium R. 4,000 may be received in March.
5. A machine of Rs. 60,000 is to-be purchased by higher purchased contract on 1^st April 2021 and the amount is to be paid by three equal monthly installments with 12% interest per annum Those installments to be paid end of the April, May and June
6. Time lag:
   Credit Sales 1 month
   Credit Purchases 2 months
   Overhead 1 month and wages ½ month

Solution:

Cash Budget of Swayam Limited
From March to May, 2021

Particulars	March	April	May
Opening Balance	30,000	44,400	39,200
Add: Receipts
Cash Sales	28,000	36,000	30,000
Credit Sales	22,000	28,000	36,000
Second Instalment of Share	20,000
Share Premium	4,000
Total Receipts(A)	1,04,000	1,08,400	1,05,200
Less: Payments
Credit Purchases	40,000	28,000	28,000
5% Commission on Sales	2,200	2800	3600
Machine Purchase		20,600	20,400
Factory OH	6,600	6,800	7,000
Selling & Dist. Oh	1800	1800	2,000
Wages	9000	9200	8,600
Total Payments(B)	59,600	69,200	69,600
Closing Balance(A-B)	44,400	39,200	35,600

Working Note 1: Calculation of Sales

Month	Total Sales	Cash (50%)	Credit (50%)	1 Month Credit
January	40000	20000	20000	February
February	44000	22000	22000	March
March	56000	28000	28000	April
April	72000	36000	36000	May
May	60000	30000	30000	June

Working Note 2: Commission on sales

Month	Total Sales	5% commission	Next Month
January	40000	2000	February
February	44000	2200	March
March	56000	2800	April
April	72000	3600	May
May	60000	3000	June

Working Note 3: Calculation of Purchase

Month	Purchase	2 month credit
January	40000	March
February	28000	April
March	28000	May
April	64000	June
May	40000	July

Working Note 4: Calculation of Overhead

Month	Factory OH	Selling & Dist. Oh	1 Month Time lag
January	6400	1600	February
February	6600	1800	March
March	6800	1800	April
April	7000	2000	May
May	6400	1800	June

Working Note 5: Calculation of Wages

Month	Wages	February	March	April	May	June
January	8000	4000	4000
February	8800		4400	4400
March	9200			4600	4600
April	9200				4600	4600
May	8000					4000
				9000	9200	8600

Working Note 6: Calculation of Machine Installment

Particular	Interest on	Instalment of Month	Interest payable	amount payable	Month
1st	60000	20000	60000*12%*1/12= 600	20000+600= 20600	April
2nd	40000	20000	40000*12%*1/12= 400	20000+400= 20400	May
3rd	20000	20000	20000*12%*1/12= 200	20000+200= 20200	June

Question 4

Prepare Cash Budget for three months ending on 31″ July, 2017 from the following information of Maru Limited: –

Month	Sales Rs.	Purchase Rs.	Wages Rs.	Overhead Expenses
March	300000	160000	104000	80000
April	320000	180000	112000	100000
May	300000	200000	96000	120000
June	400000	220000	128000	140000
July	440000	240000	144000	160000

Cash balance as on 1″ May, 2017 Rs.2,20,000
Other information:

1. Assume 10% of total sales to be cash sales and 20% of total purchases to be cash purchases.
2. 50% of credit, sales are- realized in the month following the sales and remaining 50% in the- second month following the sales.
3. A machine costing Rs.2,40,000 is purchased, is due for delivery in June, 20% down payment is payable against delivery and the balance after three months.
4. Interest and dividend on investments Rs. 40,000 may be received in June.
5. An old machine is sold for Rs 1,00,000 in July.
6. Overheads include Rs.20,000 depreciation on fixed assets per months
7. Period of credit allowed by supplier is one month.
8. The time lag in the payment of wages is ½ month, The time lag in the payment of overhead expenses ½ month

Solution

Cash Budget of Maru Limited
From May to July, 2017

Particulars	May	June	July
Opening Balance	2,20,000	1,51,000	36,000
Add: Receipts
Cash Sales	30,000	40,000	44,000
Credit Sales	2,79,000	2,79,000	3,15,000
Interest & Dividend		40,000
old machine sold			1,00,000
Total Receipts(A)	5,29,000	5,10,000	4,95,000
Less: Payments
Cash Purchases	40000	44000	48000
Credit Purchases	1,44,000	1,60,000	1,76,000
Machine Purchase		48,000
Overhead Expense	90,000	1,10,000	1,30,000
Wages	104000	112000	1,36,000
Total Payments(B)	3,78,000	4,74,000	4,90,000
Closing Balance(A-B)	1,51,000	36,000	5,000

WN1: Calculation of Sales

Month	Sales Rs.	Cash (10%)	Credit (90%)
March	300000	30000	270000
April	320000	32000	288000
May	300000	30000	270000
June	400000	40000	360000
July	440000	44000	396000

Credit Sale

Month	Month	Credit (90%)	March	April	May	June	July
February	March	270000		135000	135000
March	April	288000			144000	144000
April	May	270000				135000	135000
May	June	360000					180000
June	July	396000
					279000	279000	315000

WN2: Calculation of Purchase

Month	purchase	Cash (20%)	Credit (80%)	1 month credit
March	160000	32000	128000	April
April	180000	36000	144000	May
May	200000	40000	160000	June
June	220000	44000	176000	July
July	240000	48000	192000	August

WN3: Calculation of Overhead

Month	Overhead	Less Depreciation	Overhead after Depreciation
March	80000	20000	60000
April	100000	20000	80000
May	120000	20000	100000
June	140000	20000	120000

Month	OH after Dep.	March	April	May	June	July
March	60000	30000	30000
April	80000		40000	40000
May	100000			50000	50000
June	120000				60000	60000
July	140000					70000
		30000	70000	90000	110000	130000

WN4: Calculation of Wages

Month	Wages	March	April	May	June	July
March	104000	52000	52000
April	112000		56000	56000
May	96000			48000	48000
June	128000				64000	64000
July	144000					72000
				104000	112000	136000

Question 5

From the information given below, prepare Cash Budget for three months ending on 31 May, 2012

Month	Sales Rs.	Purchase	MFG Exp	ADMIN EXP	Other Exp
January	300000	200000	20000	15000	8000
February	400000	300000	25000	14000	8000
March	600000	400000	30000	13000	8000
April	400000	300000	35000	12000	8000
May	500000	400000	40000	11000	8000
June	600000	500000	45000	10000	8000

 Other information –

1. Cash balance as on March 2012 is Rs.2,00,000.
2. Cash sales are 30% and cash purchases are 20%.
3. 50% of credit sales are received in month following sales and remaining 50% in the second month after sales.
4. Creditors are paid one month after purchase.
5. Quarterly Interest on 10% investment of Rs,1,00,000 are received in March.
6. Machinery costing Rs, 1,00,000 is purchased in April.
7. Time lag
   • Manufacturing Expenses 1/4 month
   • Administrative Expenses 2/5 month
   • Other expenses                 3/5 month

Solution

Cash Budget
From March to May, 2012

Particulars	March	April	May
Opening Balance	2,00,000	2,57,350	1,93,200
Add: Receipts
Cash Sales	1,80,000	1,20,000	1,50,000
Credit Sales	2,45,000	3,50,000	3,50,000
Interest on 10% Investment	2,500
Total Receipts(A)	6,27,500	7,27,350	6,93,200
Less: Payments
Cash Purchases	80000	60000	80000
Credit Purchases	2,40,000	3,20,000	2,40,000
Machine Purchase	–	1,00,000	–
MFG Expense	28,750	33,750	38,750
Admin Expense	13,400	12,400	11,400
Other Exp	8,000	8,000	8,000
Total Payments(B)	3,70,150	5,34,150	3,78,150
Closing Balance(A-B)	2,57,350	1,93,200	3,15,050

WN1: Calculation of Sales

Month	Sales Rs.	Cash (30%)	Credit (70%)
January	300000	90000	210000
February	400000	120000	280000
March	600000	180000	420000
April	400000	120000	280000
May	500000	150000	350000
June	600000	180000	420000

Credit Sales

Month	Credit (70%)	January	February	March	April	May	June
January	210000		105000	105000
February	280000			140000	140000
March	420000				210000	210000
April	280000					140000	140000
May	350000						175000
June	420000			245000	350000	350000

WN2: Calculation of Purchase

Month	Purchase	Cash (20%)	Credit (80%)	1 Month Credit
January	200000	40000	160000	February
February	300000	60000	240000	March
March	400000	80000	320000	April
April	300000	60000	240000	May
May	400000	80000	320000	June
June	500000	100000	400000	July

WN3: Calculation of MFG Expense

Month	MFG Exp	January	February	March	April	May	June
January	20000	15000	5000
February	25000		18750	6250
March	30000			22500	7500
April	35000				26250	8750
May	40000					30000	10000
June	45000			28750	33750	38750

WN4: Calculation of Admin Expense

Month	Admin Exp	March	April	May	June	July
January	15000	9000	6000
February	14000		8400	5600
March	13000			7800	5200
April	12000				7200	4800
May	11000					6600
June	10000			13400	12400	11400

WN4: Calculation of Admin Expense

Month	Other Exp	March	April	May	June	July
January	8000	3200	4800
February	8000		3200	4800
March	8000			3200	4800
April	8000				3200	4800
May	8000					3200
June	8000			8000	8000	8000

Question 6

From the following information, prepare Cash Budget of Ronak Ltd. For the months of April, May and June, 2025

Month	Sales	Purchases	Wages	Overheads
February	240000	168000	20000	19000
March	280000	200000	24000	23000
April	160000	220000	16000	17000
May	216000	180000	28000	29000
June	180000	160000	20000	18000

Other information 

• Cash and bank Balance on 1-4-2025 Rs. 20,000
• 75% of purchases and sales are on credit terms
• The rate of cash discount on cash purchases and cash sales is 5%
• 60% of credit sales are realized in the month after sales and remaining 40% in the second month after sales.
• Time lag: Credit purchases ½ month, Wages ¼ month. Overheads 1 month.
• Overheads include Rs. 5,000 per month, for depreciation on fixed assets.
• Interest on 8% Debentures of RS. 4,00,000 is payable quarterly April,2011.

Interest on investments of Rs. 2,00,000 at 10% per annum is receivable half yearly in June, 2025.

Solution:

Cash Budget of Vedant Ltd.
of April, May and June, 2025

Particulars	April	May	June
Opening Balance	20,000	2,250	-20,200
Add: Receipts
Cash Sales	38,000	51,300	42,750
Credit Sales	1,98,000	1,56,000	1,45,200
Interest on 10% Investment			10,000
Total Receipts(A)	2,56,000	2,09,550	1,77,750
Less: Payments
Cash Purchases	52,250	42,750	38,000
Credit Purchases	1,57,500	1,50,000	1,27,500
Interest on 8% Debenture	8,000
Wages	18,000	25,000	22,000
Overhead	18,000	12,000	24,000
Total Payments(B)	2,53,750	2,29,750	2,11,500
Closing Balance(A-B)	2,250	-20,200	-33,750

WN1: Calculation of Sales

Month	Sales Rs.	Cash (25%)	After Discount	Credit (75%)
February	240000	60000	57000	180000
March	280000	70000	66500	210000
April	160000	40000	38000	120000
May	216000	54000	51300	162000
June	180000	45000	42750	135000

Credit Sales

Month	Credit (75%)	February	March	April	May	June
February	180000		108000	72000
March	210000			126000	84000
April	120000				72000	48000
May	162000					97200
June	135000
				198000	156000	145200

WN2: Calculation of Purchase

Month	Purchase	Cash (25%)	5% Discount	Credit (75%)
February	168000	42000	39900	126000
March	200000	50000	47500	150000
April	220000	55000	52250	165000
May	180000	45000	42750	135000
June	160000	40000	38000	120000

Credit Purchase

Month	Credit (75%)	February	March	April	May	June
February	126000	63000	63000
March	150000		75000	75000
April	165000			82500	82500
May	135000				67500	67500
June	120000					60000
				157500	150000	127500

WN3: Calculation of Overhead

Month	Overhead Expense	After Depreciation	1 month
February	19000	14000	March
March	23000	18000	April
April	17000	12000	May
May	29000	24000	June
June	18000	13000	July

WN4: Calculation of Wages

Month	Wages	February	March	April	May	June
February	20000	15000	5000
March	24000		18000	6000
April	16000			12000	4000
May	28000				21000	7000
June	20000					15000
				18000	25000	22000