Cash Budget Format

Cash Budget Format

The cash budget is divided into four sections:

1. Cash receipts: lists all cash inflows excluding cash received from financing
2. Cash disbursements: consists of all cash payments excluding repayments of principal and interest
3. Cash excess or deficiency: determines if the company will need to borrow money or if it will be able to repay funds previously borrowed
4. Financing: details the borrowings and repayments projected to take place during the budget period.

The Cash Budget

Assume the following information for Royal:

• Maintains a 16% open line of credit for $75,000.
• Maintains a minimum cash balance of $30,000.
• Borrows on the first day of the month and repays loans on the last day of the month.
• Pays a cash dividend of $49,000 in April.
• Purchases $143,700 of equipment in May and $48,300 in June (both paid in cash).
• Has an April 1st cash balance of $40,000.

Example

Over to you

Please take some time to review this exercise and when you are ready move on to the next step, where you will find a short quiz.