Cash cycle, Cost Accounting

Assignment Help:

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.

Related Discussions:- Cash cycle

Approach in cost accounting, Approach in Cost Accounting Cost accounti...

Approach in Cost Accounting Cost accounting is based on the framework or concept of cost centers that is all the costs incurred throughout the production process contain to be

Accounting records - nature and purpose of cost accounting, Accounting Reco...

Accounting Records - Nature and Purpose of Cost Accounting The quantitative information employed in the management and cost accounting systems can be obtained from with two ac

The cost cycle - double entry system, entries to be entered into a ledger a...

entries to be entered into a ledger account for the month of July 2009 & prepare an incoem statement. balances at 1/7/2009 Materials control $6150 Labour control (accrued wages)

Variable overhead variance (vohv), Variable Overhead Variance (VOHV) VO...

Variable Overhead Variance (VOHV) VOHV is defined by ICMA, London, as 'the variation between the standard variable production overhead absorbed in the production achieved, whet

Cost accounting, raw an organization chart of any actual or hypothetical ma...

raw an organization chart of any actual or hypothetical manufacturing organization to show the position of management/cost accounting department within an organization and discuss

Choice of budget flexing basis, Choice of Budget Flexing Basis The mo...

Choice of Budget Flexing Basis The most suitable flexing basis must be considered where it assists in the comparison of alternative budget data at the planning stage and for

Determine the current ratio, When firms enter into loan agreements with the...

When firms enter into loan agreements with their bank it is very common for the agreement to have a restriction on the minimum current ratio the firm has to maintain. So, it is imp

Labour costs, what are the classifications of labour costs? what is employe...

what are the classifications of labour costs? what is employee psyche?

Write Your Message!

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd