← Management accounting to inform decision-making

The comparative cash budget (every paper)

Two options, side by side, over three to six months. Cash only.

Working through it without losing the chain

  • Set out receipts, then payments, then the surplus/deficit, then the bank roll-forward.
  • Strike out depreciation and bad debts before you start — they are the planted distractors.
  • Apply the collection pattern carefully: "60% in the month of sale, 40% the following month" spreads one month's sales over two.
  • Carry the closing balance to the next month's opening. Check the last month against the total of all receipts less all payments plus the first opening balance.
  • A negative closing balance is a real answer — say it means an overdraft is needed.
✓

Credit sales spread across multiple months

A collection pattern like "80% the month after sale, 19% the second month after" means EACH month's sales contribute cash receipts across two or more later months. Build a small grid — sales month down the side, collection month across the top — before filling in the cash budget itself, rather than trying to track it in your head. Exam-style Building the collection grid before the budget Credit sales are collected 80% the month after sale, 19% the second month after, 1% bad debts. Set up columns for the months you need cash figures for, and rows for each month sales actually occurred (including one or two months before the budget period starts). For each sales month, spread 80% into the next column, 19% into the one after that. Sum each cash-budget month's column down to get that month's total credit-sale receipts. Add cash sales for the same month directly — those are not spread. ✓ The grid catches the sales made just before the budget period, which still generate receipts inside it — the easiest place to lose marks without one.

Practise just this