Question

The following information is available for Pharoah Company for the month of January: Expected cash receipts $59,400; expected cash disbursements $66,090; and cash balance on January 1, $12,230. Management wishes to maintain a minimum cash balance of $7,570. Prepare a basic cash budget for the month of January.

Answer 1

Answer:

See cash budget below

Explanation:

A cash budget shows the expected future cash receipts and payment for a forthcoming accounting period and the cash  balance.

It is prepared as follows:

Cash budget

                                                                    $

Expected cash receipts                         59,400

Expected cash payment                         66,090

Cash deficit                                              (6690 )

Opening cash balance                            12,230

Borrowed fund                                          2,030

Closing cash balance                               7,570            

Note:

The borrowed is the difference between the net cash balance and the the minimum cash balance

Net cash balance = 12,030 - 6,690=        5340

Borrowed fund = 7,570-5340= 2,030

Borrowed fund = $2,030