2. Cash budget is a summary statement of
the firms expected cash inflows and
outflows over a projected time period.
cash budget involves a projection of
future cash receipts and cash
disbursements over various time
intervals.
3.
4. FUNCTIONS OF CASH BUDGET
• Determining the future cash needs of the firm
• Planning for financing of those needs.
• Exercising control over cash and liquidity of the firm.
{The overall objective of a cash budget is to enable the firm to
meet all its commitments in time and at the same time prevent
accumulation of unnecessary large balance with it}
5. Whyarecashbudgetsprepared?
Assists with the identification of when commitments are due
Ensures money is available at that time
Important business able to meet commitments as they fall due
If debts are not paid on time poor reputation will affect credit
rating of business
CashBudgets
5
6. METHODS OF PREPARING A CASH
BUDGET
Cash budget can be prepared by many methods . some of them
are ,
Receipts and payments method
Adjusted profit and loss a/c method
Balance sheet method
7. RECEIPTS&PAYMENTSMETHOD
The cash receipts from various sources and cash payments to
different agencies are estimated.
The receipts and payments may be divided into two specific
categories
a) Receipts (capital,revenue)
b) Payments(capital,revenue)
8. ADJUSTEDPROFITANDLOSSA/C
The cash budget is prepared on the basis of opening cash and
bank balances , projected profit and loss a/c and balance of
various asset and liabilities. Under this method ,the forcasted
profit is adjusted for non-cash items in the profit and loss a/c like
depriciation ,provisions ,accurals etc By preparing adjusted
profit and loss a/c to find out the cash made available by the
profit.This method is used for long- term cash budget.
9. BALANCESHEETMETHOD
Under this method a budgeted balance sheet is prepared by
estimating all assets and liabilities exept cash. The balancing
figure of two sides of the estimated balance sheet is taken as cash
balnce .This method is also used for long term cash budget.
