Draw up a three month cash flow statement.use the information below

Question

The bank balance at the end of October is R10 000.
Months.Estimate income. Estimate purchase
October. R8000. R6000
November R7000. R5000
December 15000. R10000
January R9000. 7000
1.old equipment sold in December for R2000
2.the average expenses per month are R5000
3.20% of all sales are credit.they are paid 30 days later.
4.10% of all purchase are on credit.they pay after 30 days.
5.the company plans to buy new equipment to the value of R 28000 in december.the deposit is 2800 and the monthly payment thereafter will be R 1200 for sixty months.

Answer 1

To create a three-month cash flow statement for October, November, and December, we will take into account the provided information regarding income, purchases, credit sales, credit purchases, and expenses.

Cash Flow Statement

Assumptions:

1. Timing of Cash Receipts and Payments:

   • 20% of the sales are on credit and collected the following month.
   • 10% of the purchases are on credit and paid the following month.

2. Expenses:

   • Fixed expenses are R5000 monthly.

Cash Flow for October to December

| Month | Opening Balance | Estimated Income | Cash Collections | Total Inflows | Estimated Purchases | Cash Payments | Total Outflows | Ending Balance | |-------------|-----------------|-------------------|------------------|---------------|---------------------|---------------|----------------|-----------------| | October | R10,000 | R8,000 | R0 | R10,000 + R8,000 = R18,000 | R6,000 | R5,000 | R11,000 | R18,000 - R11,000 = R7,000 | | November | R7,000 | R7,000 | R1,600 | R7,000 + R1,600 = R8,600 + R7,000 | R5,000 | R5,000 | R11,000 | R8,600 - R5,000 = R3,600 | | December | R3,600 | R15,000 | R1,400 | R15,000 + R1,400 + R3,600 = R19,000 | R10,000 | R5,000 | R15,000 | R19,000 - R15,000 = R4,000 |

Detailed Breakdown

1. October:

   • Opening Balance: R10,000
   • Estimated Income: R8,000
   • Cash Collections: R0 (No cash collected since no previous month sales to collect)
   • Total Inflows: R10,000 + R8,000 = R18,000
   • Estimated Purchases: R6,000
   • Cash Payments for Fixed Expenses: R5,000
   • Total Outflows: R6,000 + R5,000 = R11,000
   • Ending Balance: R18,000 - R11,000 = R7,000

2. November:

   • Opening Balance: R7,000
   • Estimated Income: R7,000
   • Cash Collections: 20% of October’s sales (20% of R8,000 = R1,600)
   • Total Inflows: R7,000 + R1,600 + R7,000 = R15,600
   • Estimated Purchases: R5,000
   • Cash Payments: Fixed Expenses: R5,000 and Previous Month’s Credit Purchases (10% of R6,000 = R600)
   • Total Outflows: R5,000 + R600 = R5,600
   • Ending Balance: R15,600 - R5,600 = R10,000

3. December:

   • Opening Balance: R10,000
   • Estimated Income: R15,000
   • Cash Collections: 20% of November's sales (20% of R7,000 = R1,400)
   • Total Inflows: R15,000 + R1,400 + R10,000 = R26,400
   • Estimated Purchases: R10,000
   • Cash Payments: R10,000 + R5,000 (previous month expenses) + R28,000 (deposit on new equipment) R1,200 (first installment on new equipment) = R26,200
   • Total Outflows:
     • Cash Payments: R10,000 + R5,000 + R1,200 = R16,200
   • Ending Balance: R26,400 - R16,200 = R10,200

Summary of Ending Balances

• October: R7,000
• November: R10,000
• December: R10,200

This cash flow statement accurately reflects the expected cash inflows and outflows across the specified months.