This 5 page paper demonstrates how to prepare a budget cash flow and an income statement and answer questions about a case study supplied by the student. The bibliography cites 4 sources.
Name of Research Paper File: TS14_TEcasea1.rtf
Unformatted Sample Text from the Research Paper:
is used and the balance carried forward for the budgeted June cash flow. When we look at the cost of sales, these is the materials that are used for the
sales, i.e stock. However, it appears that some of the stock is bought on a credit sale, this means, although we are told that the gross profit to sales percentage
is 80% we need to amend this for the cash flow, deducting the credit sales from the month in which they occur, and adding them onto the next month.
For example in June there were sales of 6,700, of which 80% is the cost of sales, making this 5,360. However, there needs
to be a deduction made for the credit purchases for that month, This means we deduct the 950, giving us 4410. However, there are credit sales from the previous month
to include and we need to adds these in, giving us a total cost of sales for June of 5210. There are also several other assumptions that have been
made by looking at the balance sheet. We arte told the interest rate on the loan is 9%, however, the repayment is less that a total years interest., Therefore we
have used the payment due in July as the payment of bank interest that is stated under the current liabilities. This is most likely to be due if the loan
has not been outstanding for a full year. June July August Income 6700 8200 8000 Cost of Sales 5210 6410 6500 Wages 3,000 3,000 3,000 General
Expenses 350 350 350 Rent 5400 0 0 Interest 0 3,000 0 Total outgoings 13960 12760 9850 Net Income -7260 -4560 -1850 Balance brought forward 5,300 -1,960 -6,520 Net Balance