Cash forecasting and budgeting, Managerial Accounting

A cash budget is one of the main important devices to plan and control cash payments and receipts. In preparation of a cash budget the subsequent points are considered.

Credit period permitted to debtors and the credit period permitted by creditors to the firm for goods and services.
Payment of dividends and taxes, and the month wherein such payments are to be made.
Non-consideration of non-cash transactions or depreciation. This type of transactions has no signify on cash flow.
Minimum cash balance required and the amount of credit or overdraft limit permitted by the banks.
Plan to deal along with cash surplus and cash deficit situations.
Debt repayment as time and amount.

In the figure 2 highlights the cash shortage and cash surplus position over the period of cash budget for preplanning to acquire corrective and essential steps.

1543_Cash Forecasting and Budgeting.png

Figure: Cash surplus and cash deficit situations

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