• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Victoria Kite Company is a small Melbourne firm that sells kites on the Web wants a master budget for the next three months, beginning January 1, 2005. When developing the master budget it was discovered that only 60% of the current sales are

Extracts from this document...

Introduction

Group Project Unit Four ACG_420 Managerial Accounting And Organizational Controls July 1, 2006 Victoria Kite Company's Master Budget Schedules Schedule A: Sales Budget January February March Total Recent & Forecasted Sales $62,000 $75,000 $38,000 $175,000 Schedule B: Cash Collections January February March Totals 60% of Current Month Sales $37,200 $45,000 $22,800 $105,000 30% of Previous Month Sales 7,500 18,600 22,500 48,600 10% of 2 Months Earlier 2,500 2,500 6,200 11,200 Totals $ 47,200 $ 66,100 $ 51,500 $ 164,800 Schedule C: Purchases January February March Totals Desired ending inventory $ 6,000 $ 6,000 $ 6,000 $ 18,000 Cost of goods sold 31,000 37,500 19,000 87,500 Total needed 37,000 43,500 25,000 105,500 Less beginning inventory 39,050 8,050 6,000 53,100 Purchases $ - $ 35,450 $ 19,000 $ 52,400 Schedule D: Disbursements January February March Total 100% of last months purchases $ 35,550 $ - $ 35,450 $ 71,000 Cash Budget Jan Feb March Beginning cash balance $ 5,000 $ 5,100 $37,692 Minimum cash balance desired $ 5,000 $ 5,000 $ 5,000 Available cash balance $ - $ 100 $32,692 Cash Receipts and Disbursements Cash Collections $ 47,200 ...read more.

Middle

An ending minimum cash balance of $5,000 is desired at the end of each month and the budget shows an ending balance of ($10,400) therefore creating the need for a loan of $15,500 giving Victoria Kite Company a closing cash balance of $5,100 at the end of January 2005. (See table 1) Victoria Kite Company needs to take out a bank loan due to the lack of funds to pay the larger rent and monthly costs. The company only has the minimum starting cash balance causing a shortage when subtracting the disbursements from the cash receipts. Table 1 Cash budget Jan-05 Feb-05 Mar-05 Cash balance at the beginning of the month $5,000.00 $5,100.00 $37,692.00 Cash collected from sales $47,200.00 $66,100.00 $51,500.00 Total cash available $52,200.00 $71,200.00 $89,192.00 Cash disbursed for operations ($61,100.00) ($17,750.00) ($53,200.00) Furniture's & Fixtures ($3,000.00) Dividends ($1,500.00) Total cash disbursement ($62,600.00) ($17,750.00) ($56,200.00) Balance at the end of month before bank loan ($10,400.00) $53,450.00 $32,992.00 Required closing balance $5,000.00 $5,000.00 $5,000.00 Bank loan received $15,500.00 Bank loan repaid ($15,500.00) ...read more.

Conclusion

One other option would be to offer a cash back discount like 5% for paying within the specified net 30 day terms. This offers an incentive to both the customer and the company. The Victoria Kite Company comes to a negative excessive cash balance in January requiring them to get a bank loan. The terms of the loan are the loan has to be paid in $500 increments with 10% interest rate. The accounts receivable, cash and credit payments are the income sources that will be used to repay the bank loan. A bank loan also helps a company grow faster than it may be able to grow without the added money. If a business is working at its full capacity and still unable to meet customer demand, it may be worth taking out a bank loan to increase the facility to be able to meet customer demand. Repayment of the bank loan will be paid back in full with interest in the month of February 2005 due to the increase cash collections from sales operation sources providing the cash flow for the repayment of the bank loan. ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Accounting & Finance section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Accounting & Finance essays

  1. Unit 5 Introduction to Accounting

    The second category of expenditure comprises assets bought by the company. This results in increased productivity and enhanced efficiency of the establishment. Some of the important examples of this kind of expenditure include purchase of office automation equipments, purchase of office vehicles and purchase of furniture and computer equipments.

  2. Complete Report on Askari Commercial Bank

    The group is organized in four divisions' namely corporate banking, investment banking, international and treasury. i. Corporate And Investment Banking Divisions The corporate and investment baking divisions (CBD&IBD) are strongly positioned across priority markets with a distinct strategy for developing corporate business.

  1. Personal budget

    * Medium term savings. * Household expenses e.g. gas electricity. * Special occasions e.g. birthdays * Long term savings. * Loan investments and repayments. Budget A budget will help you live with the amount of income you earn and at times you could have more money or less money then you expected?

  2. The Purpose of Keeping Accurate Accounts

    in any way encourage an accountant to advocate the consistency concept - thereby allowing the error to remain uncorrected. However, within the general framework, judgement may have to be applied for amounts which are not material. In other words, the materiality concept may be recognised so long as it is not in conflict with Generally Accepted Accounting Principles (GAAP).

  1. What does Finance involve.

    My break even point is quite high so to make sure I meet my break even point I will attract customers to use more of my services and buy my products. This will increase the changes of my meeting my break even point every two weeks and I will be

  2. This report has been produced as evidence for Unit 9 - 'Financial Services' - ...

    If you use the card for ongoing borrowing, and intend to pay off the minimum amount every month, then a shorter interest free period with lower rates might suit you better. If you travel frequently, it may be worth considering a card, which allows you to pay your bills via direct debit.

  1. Budget in multinational company

    INTRODUCTION 4 2. CRITICISMS OF BUDGET 4 3. BUDGET IN MODERN COMPANIES 6 4. WHAT IS A BUDGET 6 5. INNOVATION IN BUDGETARY CONTROL 6 5.1 BENCHMARKING 7 5.2 ROLLING FINANCIAL FORECASTING AND ENTERPRISEWIDE INFORMATION SYSTEM 7 5.3 ACTIVITY-BASED MANAGEMENT SYSTEM 8 5.4 BALANCED SCORECARD 8 6. CONCLUSION 9 REFERENCES 10 BIBLIOGRAPHY 10 1.

  2. Management Accounting Report.

    When the production is at 10,000 dispensers per annum the margin of the safety in units will be 7,600 units or 76%, because 10,000 take away 2,400 equal 7,600. The maximum profit that can be earned for the year is �190,000 but if the variable costs are increased by �5

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work