1. Managerial Accounting
Chapter 40
Managerial Accounting
Cash Budgets
Prepared by Diane Tanner
University of North Florida
Copyright ©2015. University of North Florida. All rights reserved.

2. I.e., accrual-based income statement
Cash Budget
A VERY important budget
Involves the planning and timing of cash flows
A necessary supplement to the budgeted income statement
Why?
Revenues and expenses
I.e., accrual-based income statement
Cash inflows
and outflows = 2

3. Sources of Cash Inflows/Outflows
All cash inflows are cash receipts
Payments from customers
Interest income received
All cash outflows are cash disbursements
Payments for inventory purchases
Payments for operating expenses
Payments for capital expenditures
Payments for dividends

4. Cash Budget Formats Cash receipts budget Cash disbursements budget4
Cash receipts budget
Includes only cash inflows
Cash disbursements budget
Includes only cash outflows
Complete cash budget
Detailed format
Lists cash inflows, cash outflows, and beginning and ending cash balances
Summary format
A single total for cash receipts and a single total for cash disbursements
Shows beginning balance plus cash receipts less cash disbursements and often financing required to achieve a minimum cash balance

5. Cash Receipts Budget Example
Cynedyne estimates it will collect 24% of its sales during the month of sale, 56% in the month after the sale, and 19% in the second month following the sale. 1% is estimated to be uncollectible. Projected sales are:
April
May
June
July
August
Projected sales revenue
$230,000
$220,000
$287,000
$261,000
$255,000
Prepare a cash receipts budget in good form for June.
Cash to be received during June from:
June sales
$68,880
$287,000 x 24%
$220,000 x 56%
May sales
123,200
$230,000 x 19%
April sales
43,700
Budgeted cash receipts
$235,780 5

6. Cash Disbursements Budget Example
Cynedyne, Inc. provided the following budget information for the next five months:
April
May
June
July
August
Projected purchases
  $79,000
  $95,000
  $89,000
  $78,000
  $82,000
Budgeted income tax expense
  28,000
  24,000
  26,000
  25,000
Inventory purchases: Paid 30% in the month purchased; 70% in the following month.
Operating expenses are budgeted at $91,000 in May, with an increase by $1,500 per month. Included in the monthly amount is depreciation of $4,200.
Operating expenses are paid 40% in the month incurred and 60% in the next month.
The company make a monthly note payment for $2,850, of which $150 is interest.
Cynedyne pays income taxes during the month after accrual. 
Prepare a cash disbursements budget in good form for June.
Cash to be paid for June purchases (30% x $89,000)
$26,700
Cash to be paid for May purchases (70% x $95,000)
66,500
Cash to be paid for June operating ($92,500 - $4,200) x 40%
35,320
Cash to be paid for May operating ($91,000 - $4,200) x 60%
52,080
Cash to be paid for note and interest
2,850
Cash to be paid for income taxes
24,000
Budgeted cash disbursements
$207,450

7. Summary Cash Budget Example
Ceredyne has a budgeted June 1 cash balance of $16,000. Total budgeted cash receipts are $235,780. Total budgeted cash disbursements are $207,450. Prepare a summary cash budget for June.
Budgeted beginning cash balance
$ 16,000
Add budgeted cash receipts
235,780
Less budgeted cash disbursements
(207,450)
Budgeted ending cash balance
$ 44,330 7

8. The End