Ginn Tips On Activity 73 And Case 9, 42, 12

Ginn Tips On Activity 73dr Ginns Tips For Doing Case 9 42 1234a

Check the accounting data file in the questions and answers discussion forum to ensure correct data usage. Understand that the sales budget influences all other budgets, emphasizing that the sales budget drives cash receipts, and highlights the distinction between accrual income and cash flow. Develop a model illustrating how a cash budget functions, possibly through online resources or videos. Lay out the problem with worksheets or notes, then utilize Excel to create structured worksheets for sales budget, cash receipts, purchases, and cash disbursements. Enter projected sales, cash sales, sales on account, and corresponding calculations in the sales budget; revenue collections in the cash receipts budget; costs and inventory needs in the purchases budget; and payments and expenses in the cash disbursements budget. Complete the calculations carefully, aiming to match check figures provided in the scenario, and revise as needed. Finally, review your work for accuracy, aiming for approximate alignment with provided check figures such as sales on account, cash receipts, purchase costs, and net income, using these exercises to reinforce understanding of budget-driven financial planning concepts.

Sample Paper For Above instruction

Financial planning and budgeting are fundamental skills in managerial accounting, enabling firms to forecast future financial performance and make informed operational decisions. The case discussed here underscores the importance of the sales budget as a primary driver influencing subsequent budgets—including cash receipts, purchases, and cash disbursements—and highlights the distinction between accrual-based accounting and cash flow management.

Understanding that the sales budget drives all other budgets is crucial. It establishes the foundation for planning cash inflows and outflows, which are critical for maintaining liquidity and funding operations. The recognition that income statements are based on accrual accounting—recognizing revenues when earned regardless of cash collection—is essential for accurate financial planning. This concept ensures that budgets are aligned with anticipated cash flows, not merely accounting income, securing the firm's operational sustainability.

Practically, constructing an integrated budget involves several steps. First, a sales budget must be prepared, detailing projected sales for each month, including both cash and credit sales. In Excel, this can be organized into rows for total sales, with formulas multiplying total sales by estimated percentages for cash and credit components. This step lays the groundwork for calculating expected cash receipts, which depend on timing and collection patterns of credit sales, often modeled with expected collection percentages for the current and previous months.

The purchases budget then forecasts the cost of goods sold based on sales estimates, incorporating historical data on cost percentages and inventory policies. Excel formulas multiply sales figures by a cost percentage to determine purchase requirements, and adjustments are made for desired ending inventories. The purchases budget informs the cash disbursements, which include payments for inventory and other operating expenses such as salaries, advertising, taxes, and commissions. These are similarly modeled in Excel with formulas multiplying estimated percentages or fixed amounts, ensuring cohesive and accurate cash flow projection.

Critical to effective budgeting is the consideration of timing and financing. For instance, large equipment purchases financed primarily through existing cash, marketable securities, or short-term loans require careful planning. Assumptions about minimum cash balances and interest costs on borrowing influence the cash flow forecasts and the necessity for external financing. Management must balance maintaining liquidity with optimizing use of available resources, ensuring operational needs are met without unnecessary borrowing costs.

By following these steps—constructing detailed budgets, leveraging Excel for calculations, and aligning projections with actual check figures—managers can develop a comprehensive cash flow plan. This plan helps anticipate potential deficits, identify funding needs, and evaluate financing options, ultimately supporting sound financial management. Such exercises deepen the understanding of the interaction between sales activities, cash management, and financial health, which are vital for the sustainable growth of a firm.

References

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