cash budget Flashcards
what is a cash budget?
A cash budget is a plan of how a business expects to spend money (payments) and receive money (receipts).
what is an opening balance?
the money that you have at the start of week/month.
what is a closing balance?
the money that you have at the end of the week/month (this is also your closing balance for the next week/months opening balance).
what are reciepts?
the money that you get in during the week or the month.
what are payments?
the money that you spend during the month/week.
what is surplus?
a positive balance. This will happen when receipts are greater than payments.
what is deficit?
a negative balance. This will happen when payments are greater than receipts.
why would a business draw up a cash budget?
-to see if it is facing surplus,
-To see whether another source of finance is needed, e.g. a bank overdraft to overcome a month where there may be a deficit,
-To highlight periods where expenses are particularly high,
-To help with decision making, e.g. when to make a product,
what is not used in cash budget?
profit and loss are not used in cash budget as it is just a plan of expectations for spending and receiving money.
