Question3 (12Marks)
Hristo Ventures, a new business, starts trading in sports shoes on 1
st January 2021 and expects to make the following transactions for the 6 months ending 30th June20 21:
(i) Sales are expected to be 500 units (sports shoes) per month for the 3 months from January to March and then 700 units per month from April to June.
(ii) The selling price will be £48 per unit.
(iii) All sales will be cash sales with cash received in the same month the sale takes place.
(iv ) Payment for Purchases of inventory (sports shoes) will take place on the month after receiving the inventory. Each unit of inventory will cost £30.
(v ) Wages are expected to be £2000 per month and will be paid in the month in which they are incurred.
(v i) Rent will be £3000 per month to be paid quarterly in advance.
(v ii) General overheads are expected to cost £5000 per month and will be paid in the month in which they are incurred.
(v iii) Bought a laptop for the business in April for £2000
Required
a) Prepare a cash budget for the 6 months from January to June 2021. Show the cash receipts and cash payments the business expects to have each month and the cash balance at the end of each month. (7marks)
b) Prepare a profit budget for the 6 months ending 30th June 2021. (5marks)
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