Managerial Accounting

Managerial Accounting

1. Cash receipts budgets for July, August, and September

		July	August	September
Total sales		$ 63,400	80,600	48,600
Cash sales	20%	12,680	16,120	9,720
Credit sales	80%	50,720	64,480	38,880

 

A1 Manufacturing Cash Receipts Budget for July, August, and September

	July	August	September
Cash sales	$12,680	16,120	9,720
Collections for accounts receivables	47,000	50,720	64,480
Net cash receipts	59,680	66,840	74,200

 

AI manufacturing has been utilizing budgeted cash receipts to collect dues from customers, which increase debited amounts in the SFP (Statement of Financial Position).

The manufacturing corporation was recognizing cash after receiving from external sources, including clients, banks, and investors. However, some adjustments were made on sales and credit to enhance the accuracy of the budgeted figures. AI manufacturing agreed that it would collect its credit sales after a month of selling products. Besides, the managers decided that cash sales would be 20% of the gross amount, while credit sales will be 80%. The first assumption when calculating the actual budget is that model computations should be easy to understand and transparent. The formulas used in the calculations are short of improving comprehension. The second assumption is that the estimates should provide key outcomes to enhance decision-making processes in the corporation. Charts and graphs are essential in summarizing the financial health of a company (Needles, Anderson, & Caldwell, 2013). Therefore, business experts can identify issues that should be addressed within the organization. The cash receipts are essential in informing managers about activities that will emerge during the forecasted period (Weygandt, Kimmel, & Kieso, 2015). Therefore, the results will facilitate decision-making processes in the organization.

2. Cash budgets for each of the months July, August, and September

AI Manufacturing Cash Budget for July, August, and September

	July	August	September
Beginning cash balance	$12,900	12,900	20,700
Cash sales	12,680	16,120	9,720
Collections on account	47,000	50,720	64,480
Net cash available	72,580	79,740	94,900
Cash Disbursements
Payments for materials	12,480	9,900	10,140
Payments for labor	10,400	8,250	8,450
Payments for factory overhead expenses	18,720	14,850	15,210
Sales commission	6,340	8,060	4,860
Rent	7,100	7,100	7,100
Office salaries	4,600	4,600	4,600
Bank loan interest	26	22	0
Total cash disbursements	59,666	52,782	50,360
Preliminary cash balance	12,914	26,958	44,540
Additional bank loan	0	0	0
Ending cash balance	12,914	26,958	44,540

 

AI manufacturing uses a cash budget to track the spending rates within the organization. The company needs to make several adjustments that can enhance the accuracy of the computations. The first assumption made when developing the cash budget is that the loan interest decreases with the repayment amount (Wild & Shaw, 2019). Therefore, during the final period, AI manufacturing did not pay any amount. The second assumption was that there was no cash shortage, and the company did not take any loan to finance its activities. The loan amount did not increase in the company, and it was assumed they minimized their spending rates. Another assumption was that AI manufacturing does not have miscellaneous costs that are exempted from the cash budget. The additional expenses are significant in avoiding financial deficits that emerge due to immediate activities or incidences (Warren, Reeve, & Duchac, 2018). Thus, in this case, the miscellaneous costs were disregarded because the company can utilize its cash correctly. The final assumption is that all debtors will repay their dues, and there is no provision for doubtful debts (Williams, 2014). The accounts receivables are critical in increasing the company’s income. It was assumed that the corporation might incorporate unique debt collection methods.