How To Prepare Cash Budget | Cash Budget Example

What is a Cash Budget?

To say that making of a cash budget is an essential management function. But, How to prepare cash budget? A cash budget may safeguard a corporation from being unready for seasonal fluctuations in cash in or out flow or set a company to take advantage of unanticipated quantity discounts from vendors.

Understanding:   A cash budget is an executive plan for the most key factor of a company’s cash position. A company’s cash position establishes how vendors will be given, how the banker will take action to a loan demand, how rapidly a business can develop etc and raises owner’s equity, and profitability.

After  the  preceding  budgets  have  been  developed,  a  cash budget  can  be  constructed. The  cash budget may be  the most  important  schedule prepared during the budgeting process because, without cash, a company cannot survive.

How to prepare Cash Budget?

The following is the model as to how to prepare cash budget. The  following model  can be used  to  summarize  cash  receipts  and disbursements in a way that assists managers to devise appropriate financing measures to meet company needs.

Cash Budget Example

Beginning cash balance                                                                                                                      XXX
 Cash receipts (collections)                                                                                                                 XXX
 Cash available for disbursements exclusive of financing                                                                  XXX
 Cash needed for disbursements (purchases, direct labor, overhead, S&A, taxes, bonuses, etc.)  (XXX)
 Cash excess or deficiency (a)                                                                                                           XXX
Minimum desired cash balance                                                                                                         (XXX)
 Cash needed or available for investment or repayment                                                                    XXX
Financing methods:
 Borrowing (repayments)                                                                         XXX
 Issue (reacquire) capital stock                                                                XXX
 Sell (acquire) investments or plant assets                                              XXX
 Receive (pay) interest or dividends                                                        XXX
Total impact ( or ) of planned financing (b)                                                                                        XXX
 Ending cash balance (c), where [(c) = (a) - (b)]                                                                                XXX

Example of  Cash Budget will more be found in other websites. Please consider searching the term in other relevant sites as “How to prepare cash budget”.

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