QUESTION 4. This question addresses Learning Outcome 1: Prepare plans for
businesses and business operations, making use of appropriate accounting data.
You have recently started working as a temp in the finance department of South
Downs Ltd. You have been given the cash budget for the next four months which was
prepared by your predecessor.
Cash in
Sales
Proceeds from sale of equipment
Cash out
Payments to suppliers
Production wages
Production overheads
Sales department costs
Administration costs
Capital expenditure
Net cash in
Opening cash balance
Closing cash balance
Month 1
£
Month 2
£
Month 3 Month 4
£
£
647,000
576,000 1,045,000 1,250,000
75,000
(400,000)
(200,000)
(20,000)
(200,000) (200,000) (200,000)
(270,000) (330,000) (330,000)
(20,000) (20,000) (20,000)
(39,000) (43,000) (49,000) (49,000)
(20,000) (20,000) (20,000) (20,000)
(325,000)
(32,000) (302,000) 501,000 631,000
50,000 18,000 (284,000) 217,000
18,000 (284,000) 217,000 848,000
South Downs Ltd does not currently have an overdraft facility.
Required:
a) Write a short commentary on the cashflow identifying any problems which you
think should be brought to management's attention.
(3 marks)
b) Make three suggestions which would improve the cash position.
(3 marks)
c) What is budgeting for? Include reference to at least three different budgeting
techniques in your explanation and outline both advantages and
disadvantages of each. Support your answer with academic research.
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