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

    This service goes by many names including: invoice factoring; receivables factoring and/or invoice discounting (which is actually slightly different from factoring). The industry, although largely unknown, is quite large (over �20 billion of turnover was factored last year) and is an old financial service that has long been used by

  1. The Purpose of Keeping Accurate Accounts

    It does this by enacting UK laws to implement EU directives. The companies act 1989 was enacted to implement the provisions of the seventh and eighth directives, which deal with consolidated accounts and auditors. There are also other European influences which have an impact on financial accounting, such as the International Accounting Standards Committee.

  2. Complete Report on Askari Commercial Bank

    Its focus remains on maintaining a well diversified, sound and remunerative credit portfolio. Prudent lending policies and effective appraisal and monitoring systems have helped in reducing the impaired loans from 14% to Rs. 1.101 billion, from Rs.1.278billion last year. The NPLs ratio as a percentage of gross advances also reduced from 2.76% to 1.54%.

  1. Budget in multinational company

    Budgets are time-consuming. A KPMG study showed (Fraser and Hope, 2001) that inefficient budgeting eats up 20 to 30 per cent of senior executives' and financial managers' time. Many surveys present the fact that financial managers need to take more than three months to produce and sign off their annual budgets.

  2. Identifying and describing the main financial service needs for a student starting at university

    You will also receive > Cover on your university or landlords property > Protection against credit card fraud > Cover for you belongings while you are transporting them between your term-time and permanent address; and > Access to legal and domestic help lines at no extra cost A REALISTIC ESTIMATE

  1. Unit 5 Introduction to Accounting

    * Keep all the profit - as the owner, all the profit belongs to the sole trader. * Business affairs are private - competitors cannot see what you are earning, so will know less about how the business works and how it succeeds.

  2. Wilson Lumber Company Case

    * Determine the resources needed for the expected sales * Establish a cash budget for 1985 * Establish Pro Forma Income Statements for Sales of 1985 Analysis Required Resource Investment 1982 1983 1984 1985 Operating Cycle 100 107 106 127 Cash Conversion Cycle 64 70 66 93 Investment in A/R

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