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Budgeting

Sales Budget

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The sales budget is the starting point in preparing the master budget, since estimated sales volume influences nearly all other items appearing throughout the master budget. The sales budget should show total sales in quantity and value. The expected total sales can be break-even or target income sales or projected sales. It may be analyzed further by product, by territory, by customer, and, of course, by seasonal pattern of expected sales.

Sales Budget

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A “Sales Budget” usually comes along with “Schedule of Expected Cash Collection” from credit sales, which will be used fpr cash budgeting (later on), and here is the cash collection schedule:

Schedule of Expected Cash Collection

Monthly Cash Collections from Customers

Frequently there are time lags between monthly sales made on account and their related monthly cash collections. For example, in any month, credit sales are collected in this manner: 15 percent in month of sale, 60 percent in the following month, 24 percent in the month after, and the remaining 1 percent are uncollectible.

The budgeted cash receipts for June and July are computed then (see below):

Cash Receipt Computed

 

Next isProduction Budget“, you may want to read it on my next post

2 Comments

2 Comments

  1. khagraj

    Jul 1, 2010 at 5:19 pm

    classification of sales budget
    consideration for preparing sales budget
    some illustration problems
    also included here okey

  2. birhan

    Jan 31, 2017 at 10:11 pm

    The following information pertains to Amigo Corporation: Month Sales Purchases July $30,000 $10,000 August 34,000 12,000 September 38,000 14,000 October 42,000 16,000 November 48,000 18,000 December 60,000 20,000 · Cash is collected from customers in the following manner: Month of sale (2% cash discount)30% Month following sale 50% Two months following sale 15% Amount uncollectible 5% · 40% of purchases are paid for in cash in the month of purchase, and the balance is paid the following month. Required: a. Prepare a summary of cash collections for the 4th quarter. b. Prepare a summary of cash disbursements for the 4th quarter. can you do this please

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