Cash cycle, Cost Accounting

The Cash Cycle: so as to deal with the problem of cash management we should have a concept about the flow of cash by a firm's accounts. The entire process of such cash flow is identified as Cash Cycle. It has been demonstrated in the figures 2 and 3. Cash is used to purchase materials from that goods are produced. Production of such goods includes use of funds for paying wages and meeting the other expenses.

935_Cash Cycle.png

Figure: The cash cycle

748_Cash Cycle1.png

Figure: Details of the Cash Cycle

Goods generated are sold either on cash or credit. In the last case the pending bills are acquired at a later date. The firm hence receives cash instantly or later for the goods sold through it. The cycle keeps repeating itself.

The diagram in the figure 2 only provides a common idea about the channels of flow of cash in a business. In terms of time, the magnitude of the flow is depicted in the diagram specified in the figure 3. The subsequent information is reflected by the figure 3.

- Raw material for production is acquired 10 days after placement of order.

- The material is transformed in goods for sale in 37 days (15+2+20) from point of B to E.

- The payment for material purchased can be deferred to 17 days i.e. 15+2, after this is received that is the distance of time among points B to D, assuming that this takes 2 days for collection of payment of the cheque.

- The amount of the bill for goods sold is acquired 32 days (30+2) after the sale of goods as is depicted with duration of time among point E to G.

- The recovery of cash spent until point D is made after 56 days (20+30+2+2+2) as demonstrated between points D to J.

Posted Date: 4/9/2013 1:54:45 AM | Location : United States







Related Discussions:- Cash cycle, Assignment Help, Ask Question on Cash cycle, Get Answer, Expert's Help, Cash cycle Discussions

Write discussion on Cash cycle
Your posts are moderated
Related Questions
ADescribe the impact of different types of standards on motivations, and specifically, the likely effect on motivation of adopting the labor standard recommended for Geeta & Compan

MARGINAL COSTING AND DIFFERENTIAL COSTING 1.     Differential costing can be used both in case of marginal costing and absorption costing. 2.     In case of marginal costing

Determine Cost per Unit By Using Marginal and Absorption Costing The given information was extracted from the book of a company for the year ended on date 31/12/2001. Outpu

Outdoor Travel Inc. needs to estimate the cost of capital for the evaluation of capital expenditures. A typical project is financed with 25% debt-to-value ratio (i.e., D/(D+E) =

A co has a standard costing system. the following are avaiable for september: actual quantity of direct materials purchased and used: 20,000 pounds Standard price of direct mater

WORKED EXAMPLES OF EXPECTED CASH COLLECTIONS PATTERNS

Slick Corporation is a small producer of synthetic motor oil. During May, the company produced 5,000 cases of lubricant. Each case contains twelve quarts of synthetic oil. To achie

Special order pricing - Shorewood Shoes Company makes and sells a variety of leather shoes for children. For its current mix of different models and seizes, the average selling pri

After you have studied this section, you should be capable to: know the idea of funds flowing by a business in a dynamic situation understand the role of working capital

Elements of Cost Nearly there are three elements of cost - labor, material, and expenses. These are additional divided into indirect and direct material, indirect and direct la