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The management of Silo Limited has asked you to prepare a cash budget for the months of February and March 2025. The following information is available:



December

January

February

March

Cash Sales

400 000

500 000

450 000

300 000

Credit Sales

600 000

405 000

450 000

495 000

Purchases

300 000

200 000

150 000

100 000

Salaries

100 000

100 000

100 000

100 000

Rental expense

10 000

10 000

11 100

11 100

Sundry Expenses

80 000

81 500

75 000

60 000

Additional Information

1. A positive opening balance of R300 000 on 1 February 2025.

2. Interest expense of R4 000 is payable per month.

3. Advertising amounts to R6 000 per month.

4. Credit sales are collected as follows:

50% in the month of sale

25% in the month following the sale

25% in the second month following the sale

5. All purchases are on credit; however, they are paid within the month of purchase to obtain a discount of 3%.

6. Salaries will double in the month of February as bonuses will be paid to employees.

7. Equipment amounting to R500 000 will be bought in March.

8. Interest in income amounting to R25 000 is received every month.

9. Old equipment will be disposed of in April 2025, and an amount of R20,000 will be received.

10. Rent income of R10 500 is received every month.

11. Sundry expenses include a depreciation amount of R20 500 per month.

Required:

Prepare a cash budget for February and March. Show all the necessary schedules.

Do not put spaces e.g. 20000 is correct and 20 000 is wrong.

Do not put the rand sign e.g. R20 000 is wrong and 20000 is correct.

Do not use brackets ( ) or - sign when recording negative amounts or when subtracting.

Solution: Cash Budget
Debtors Collection Schedule



February

March

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Total

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Cash budget of Silo Ltd





February

March

Opening balance

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Add: Total receipts

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Cash sales

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Credit sales

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Interest

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Rent

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Equipment

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Total cash available

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Less: Total cash payments

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Purchases

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Salaries

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Rent

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Interest

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Advertising

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Equipment

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Sundry Expenses

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Closing balance

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1 answer

To prepare the cash budget for Silo Limited for February and March 2025, we will first create the Debtors Collection Schedule and then the Cash Budget.

Debtors Collection Schedule

February:

  • Collections from January Credit Sales: 25% of 405000 = 101250
  • Collections from December Credit Sales: 25% of 600000 = 150000
  • Collections from February Credit Sales: 50% of 450000 = 225000

Total for February:

  1. Collections from January Credit Sales: 101250
  2. Collections from December Credit Sales: 150000
  3. Collections from February Credit Sales: 225000
  4. Total: 101250 + 150000 + 225000 = 476250

March:

  • Collections from February Credit Sales: 25% of 450000 = 112500
  • Collections from January Credit Sales: 25% of 405000 = 101250
  • Collections from March Credit Sales: 50% of 495000 = 247500

Total for March:

  1. Collections from February Credit Sales: 112500
  2. Collections from January Credit Sales: 101250
  3. Collections from March Credit Sales: 247500
  4. Total: 112500 + 101250 + 247500 = 461250

Cash Budget of Silo Ltd

| | February | March | |-------------------|----------|--------| | Opening balance | 300000 | 411250 | | Add: Total receipts | | | | Cash sales | 450000 | 300000 | | Credit sales | 476250 | 461250 | | Interest | 25000 | 25000 | | Rent income | 10500 | 10500 | | Equipment | 0 | 500000 | | Total cash available | 1307750 | 1361000 | | Less: Total cash payments | | | | Purchases | 145500 | 97000 | | Salaries | 200000 | 100000 | | Rent | 11100 | 11100 | | Interest | 4000 | 4000 | | Advertising | 6000 | 6000 | | Equipment | 0 | 500000 | | Sundry Expenses | 55450 | 39500 | | Total cash payments | 360050 | 1061600 | | Closing balance | 947000 | 299000 |

Final Blanks

Debtors Collection Schedule

Blank 1: 101250
Blank 2: 150000
Blank 3: 225000
Blank 4: 476250
Blank 5: 112500
Blank 6: 101250
Blank 7: 247500
Blank 8: 461250
Blank 9: 476250
Blank 10: 461250
Blank 11: Total: 937500
Blank 12: 937500

Cash Budget of Silo Ltd

Blank 15: 300000
Blank 16: 411250
Blank 17: 1307750
Blank 18: 1361000
Blank 19: 450000
Blank 20: 300000
Blank 21: 476250
Blank 22: 461250
Blank 23: 25000
Blank 24: 25000
Blank 25: 10500
Blank 26: 10500
Blank 27: 0
Blank 28: 500000
Blank 29: 1307750
Blank 30: 1361000
Blank 31: 360050
Blank 32: 1061600
Blank 33: 145500
Blank 34: 97000
Blank 35: 200000
Blank 36: 100000
Blank 37: 11100
Blank 38: 11100
Blank 39: 4000
Blank 40: 4000
Blank 41: 6000
Blank 42: 6000
Blank 43: 0
Blank 44: 500000
Blank 45: 55450
Blank 46: 39500
Blank 47: 947000
Blank 48: 299000

This completes your cash budget, taking into account all the scheduled collections, cash sales, and planned expenditures.