C3 - Preparing Cash Budgets

Question 1

What is meant by lagging?

Answer 1

When a business receives or pays cash at a different time to the recording of the sale, purchase of expense.

Question 2

Ignore or include depreciation in the cash budget?

Answer 2

IGNORE

Question 3

What is a master budget?

Answer 3

Brings data together from all subsidiary budgets and produces a budgeted P/L, BS and CB

Question 4

Preparing the budget -

How do you calculate the settlement discount of sales within the business?

Answer 4

Take a given % away from the CURRENT month/period sales not the total

Question 5

Preparing a budget:

How to calculate irrecoverable debts for sales?

Answer 5

Take a given % from the TOTAL period/months sales figures

Question 6

Types of cash items that ARE included in the cash budget?

Answer 6

• cash paid for asset
• additional lease payments for asset
• cash received for the proceeds of NCA that are sold

Question 7

Is depreciation included in the cash budget?

Answer 7

No

Question 8

Is the profit or loss included in the cash budget?

Answer 8

No - non cash item

Question 9

Is the purchase of an asset found in the cash budget?

Answer 9

Yes

Question 10

How is the carrying amount of an asset calculated?

Answer 10

The cost - accumulated depreciation

Question 11

How to get from the opening carrying amount to the closing carrying amount?

Answer 11

Opening carrying amount 
\+
Cost of additions in period 
-
Depreciation for the period 
- 
Carrying amount of disposals in period 
=
Closing carrying amount

Question 12

Calculation of amounts received on disposal of NCA

Answer 12

Disposal proceeds 
- 
Carrying amount of asset disposed of 
=
Profit on disposal

Question 13

When revaluing a NCA, What happens with the purchased value and revalued amount?

Answer 13

Ignore old cost price (sunk cost) and use revalued amount.

Question 14

Corporation tax t account..

Opening balance = DR or CR?
Bank amount = DR or CR?
Transfer to PL = DR or CR?
Closing balance = DR or CR?

Answer 14

Opening balance outstanding = CR
Bank owing to HMRC = DR
Transfer to PL (payment to) = CR
Closing balance = DR