Complete The Budget In A Service Company Cash Budget Assignm
Complete The Budget In A Service Company Cash Budget Assignment P
Complete the Budget in a Service Company (Cash Budget) assignment. Please use the template provided below. The document must have the complete budget and show the entire process along with an explanation. Add a brief explanation of the budget just like what you should do if you were in a meeting with senior management and you were the accountant who was tasked with presenting the budget. Put that explanation on the page below the budget that you have prepared. Hint: The budget should start with the January beginning balance and the February ending balance should also be the ending balance for the two months combined column.
Paper For Above instruction
Introduction
The primary objective of this assignment is to develop a comprehensive cash budget for a service company, illustrating the inflows and outflows of cash over a specified period, typically two months—January and February. This process encompasses estimating receipts from services rendered, projecting disbursements for operating expenses, and establishing a closing cash balance for each month. Such a cash budget is crucial for ensuring liquidity management and for making informed financial decisions to maintain operational stability.
Developing the Cash Budget
The process begins with the initial cash balance at the start of January. Then, the budget incorporates projected receipts, such as cash collections from clients, and disbursements, including payroll, rent, utilities, and other operating expenses. The forecasted cash flows are systematically organized month by month, ensuring that the ending balance of January becomes the beginning balance for February. The February ending balance, which also serves as the cumulative ending balance for the two months, is calculated after accounting for February's receipts and disbursements.
Step-by-Step Process
- Start with January's beginning cash balance.
- Add projected cash receipts for January to determine total cash available.
- Subtract projected disbursements for January to obtain the ending cash balance for January.
- Use the January ending balance as the February beginning balance.
- Repeat the process for February, adding receipts and subtracting disbursements, to derive February's ending cash balance, which also reflects the combined period's ending balance.
Explanation for Stakeholders
In presenting this budget to senior management, I would emphasize the importance of maintaining a sufficient cash buffer to cover unforeseen expenses, the need for accurate forecasting of receivables and payables, and the impact of seasonal fluctuations in service income. The cash budget provides transparency into our liquidity position, enabling proactive decision-making to optimize cash reserves, facilitate timely payments, and plan for potential financing needs. Regular monitoring and updates based on actual cash flows are recommended to ensure ongoing financial health.
Cash Budget for the Service Company
| Month | Beginning Cash Balance | Cash Receipts | Total Cash Available | Disbursements | Ending Cash Balance |
|---|---|---|---|---|---|
| January | $X,XXX | $X,XXX | $X,XXX | $X,XXX | $X,XXX |
| February | $X,XXX (January ending balance) | $X,XXX | $X,XXX | $X,XXX | $X,XXX |
(Note: Replace "$X,XXX" with actual calculated values based on your data and projections.)
References
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