...Chapter 4 Financial Forecasting Discussion Questions |4-1. |What are the basic benefits and purposes of developing pro forma statements and a cash budget? | | | | | |The pro-forma financial statements and cash budget enable the firm to determine its future level of asset needs and the| | |associated financing that will be required. Furthermore, one can track actual events against the projections. Bankers | | |and other lenders also use these financial statements as a guide in credit decisions. | | | | |4-2. |Explain how the collections and purchases schedules are related to the borrowing needs of the corporation. | | | | | |The collections and purchase schedules measure the speed at which receivables are collected and purchases are paid. To | | |the extent collections do not cover purchasing costs and other financial requirements, the firm must look to borrowing | | ...
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...AB Hi-Fi is a multi-store retail business that sells products such as DVDs, CDs, mp3 players, game consoles and TVs. In addition, AB Hi-Fi also sells music, games and DVDs via its website. AB Hi-Fi has a central warehouse that is located in Melbourne. All products purchased by the business are delivered to this central warehouse. The narrative of the production cycle and sales and revenue cycle are as follows. When product designers create and save a new product specification, the computer automatically generates and sends a message to the product planning clerk to advise them of the new product. The product planning clerk inputs the new product number into the computer and requests the computer to print a copy of the relevant product specification. After the product planning clerk collects the copy of the product specification they read it carefully to ensure they understand the nature and details of the new product. If any part of the product specification is unclear they liaise with the product designers to ensure that they understand the specification before continuing with the product planning. The product planning clerk keys in a request for details of current stocks of raw material inventory items. The computer extracts and displays a list of the items, including the inventory item’s number, a description of the material, and the amount of material currently in stock. The product planning clerk compares the list of materials inventory with the details of the raw materials...
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...ISSUES IN ACCOUNTING EDUCATION Vol. 18, No. 3 August 2003 pp. 275-290 Designing Audit Procedures When Evidence Is Electronic: The Case of e-Ticket Travel Revenue A. Faye Borthick and Jack E. Kiger ABSTRACT: The objective of the Fly Airline case is for you to learn to develop audit procedures in a context, e-ticket revenue, in which most of the evidence is available electronically, and in which many tests of controls and substantive tests can be performed using data stored in electronic form. In sequence, you will identify controls and their objectives, match controls to financial statement assertions for revenue, develop tests of controls, develop substantive tests for each assertion, and organize audit procedures into an effective and efficient audit program. Keywords: auditing; e-ticket revenue; collaborative learning; electronic evidence; internal control; monitoring; systems expertise for auditing. OVERVIEW ly Airline's revenue generation begins when a customer selects a flight for a specific date and time. The process is similar whether a ticket agent or the customer interacts with the system to make the reservation. If the customer is paying with a credit card, the system validates the credit card number the customer presents for billing before making the reservation. When it obtains approval of the credit charge (electronically, from the card issuer), the system records the charge and other details of the reservation. The customer...
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...CHAPTER 7 COVERAGE OF LEARNING OBJECTIVES | |FUNDA- | | |CASES, EXCEL, COLLAB. | | |MENTAL |CRITICAL THINKING | |& INTERNET EXERCISES | | |ASSIGN-MENT |EXERCISES AND EXERCISES| | | | |MATERIAL | | | | |LEARNING OBJECTIVE | | |PROBLEMS | | |LO1: Explain how budgets facilitate planning and |A1,B1 | | | | |coordination. | | | | | |LO2: Anticipate possible human relations problems | |25 |40 | | |caused by budgets. | | | | | |LO3: Explain potentially dysfunctional incentives | |22 |39, 40 |...
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... Additional Actual Forecast Information November $120,000 January $190,000 April forecast $230,000 December 140,000 February 210,000 March 230,000 Of Juan’s sales, 30 percent are for cash and the remaining 70 percent are on credit. Of credit sales, 40 percent are paid in the month after sale and 60 percent are paid in the second month after the sale. Materials cost 20 percent of sales and are paid for in cash. Labor expense is 50 percent of sales and is also paid in the month of sales. Selling and administrative expense is 5 percent of sales and is also paid in the month of sales. Overhead expense is $12,000 in cash per month; depreciation expense is $25,000 per month. Taxes of $20,000 and dividends of $16,000 will be paid in March. Cash at the beginning of January is $70,000, and the minimum desired cash balance is $65,000. For January, February, and March, prepare a schedule of monthly cash receipts, monthly cash payments, and a complete monthly cash budget with borrowings and repayments. Juan’s Taco Company Cash Receipts Schedule November December January February March April Sales $120,000 $140,000 $190,000 $210,000 $230,000 $230,000 Credit sales (70%) 84,000 98,000 133,000 147,000 161,000 161,000 Cash sales (30%) 36,000 42,000 57,000 63,000 69,000 69,000 Collections 40% (month after credit sales) 33,600 39,200 53,200 58,800 64,400 Collections 60% (two months after credit sales)...
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...Assignment #2 Cash The information that follows is grouped into two categories: 1) Internal Control and 2) Substantive Audit Procedures. This information is to be used to complete the exercises for this assignment. Relevant Information Internal Control Peach Blossom Cologne Company’s general disbursement checking account (account number 101) is with the Big City National Bank, Main at Michigan Avenue, Chicago, Illinois. It is used for all cash receipts and disbursements transactions. The following internal control questionnaire pertaining to cash receipts, cash disbursements, and cash balances was completed by Jasper Parsons on December 15, 2009. Review this questionnaire carefully along with the Permanent File material describing the control environment, as well as the accounting and control procedures related to the various cash subsystems. Your firm has found that personnel involved in this area are generally competent. As you read this material and analyze the internal control questionnaire, keep in mind the six control procedure categories: (1) segregation of duties, (2) access, (3) authorization, (4) input controls, (5) processing controls, and (6) output controls. Then consider possible errors or irregularities that could occur in the accounting system related to cash transactions and balances. Typical errors or irregularities involving cash receipts, disbursements, and balances include: Cash Receipts 1. Cash receipts may have been deposited...
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...CASE STUDY 3 - Cash Budget | | | | | | | | | | | | | | | | | | SCHEDULE OF EXPECTED CASH COLLECTIONS FROM CUSTOMERS: | | | Credit Sales | | | May | June | April | | (94,000 * 0.70) = 65,800 | 65,800 | | May | | (89,500 * 0.30) = 26,850, June (89,500 * 0.70) = 62,650 | 26,850 | 62,650 | June | | (75,000 * 0.30) = 22,500 | | 22,500 | Total Cash Collections | | 92,650 | 85,150 | | | | | | | | | | | SCHEDULE FOR EXPECTED PAYMENTS FOR PURCHASE OF INVENTORY | | | Inventory purchases | | May | June | April | | (195,000 * 0.60 ) = 117,000 | 117,000 | | May | | (135,000 * 0.40) = 54,000, June (135,000 * 0.60) = 81,000 | 54,000 | 81,000 | June | | (63,000 * 0.40) = 25,200 | | 25,200 | Total Payments for Inventory Purchases | 171,000 | 106,200 | | | | | | | | | | | | LBJ Company | | | | Cash Budget | | | | For the Two Months of May and June | | | | | | May | June | Cash balance | | | $20,000 | $20,000 | Add: Receipts | | | | Collections from customers | 92,650 | 85,150 | Sale of plant assets | | 33,000 | | Sale of new common stock | | 50,000 | Cash sales | | | 75,000 | 57,000 | Total receipts | | | 200,650 | 192,150 | Total Available Cash | | 220,650 | 212,150 | Less: Disbursements | | | | Purchases of inventory | | 171...
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...JEFFERSON COUNTY COMMITTEE FOR ECONOMIC OPPORTUNITY ACCOUNTANT JOB DESCRIPTION RESPONSIBLE AND ACCOUNTABLE TO: Finance Director GENERAL DESCRIPTION: Manage and support the daily accounting, financial and budgetary operations and purchasing/property management operations for the Community Services Division of Programs and the Division of Youth Services (DYS) for the City of Birmingham within the Accounting Department in an organized, cost-effective, and professional manner. SPECIFIC DESCRIPTION: PROCUREMENT DUTIES 1. Exercise due care in performing job functions to ensure that all procurement transactions are properly authorized and processed. 2. Review purchase requisitions for completeness. 3. Ensure that all purchases meet JCCEO procurement standards. 4. Prepare Purchase Orders for approved purchases. 5. Account for purchase orders. 6. Keep records on the status of open, closed, processed, and paid Purchase Orders. 7. Prepare and maintain monthly reports on the status of open Purchase Orders. 8. File Purchase Orders, documents, and reports. 9. Maintain contact with vendors and suppliers, where appropriate. 10. Investigate and solicit bids. INVENTORY MANAGEMENT DUTIES 11. Maintain accurate property records on non-expendable property owned and used by...
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...Cash Receipts Cycle Upon the due date, the company collects payment from its clients usually they pick-up the payment every Friday. However, there are instances of special arrangements for collection for specified day of the week. The collector or messenger collects the payment from its clients and issues a duplicated copy of official receipts. The original is given to the clients as its copy. Before the end of the same banking day, the collector/messenger goes to their depository bank, prepares a deposit slip and deposits their collection. The authorized duplicate copy of the deposit slip is then attached to the copy of the duplicate official receipt and turned over to the accounting department. The accounts receivable clerk will reconcile the payment transaction. She checks if the validated duplicate copy of the deposit slips corresponds to the duplicate official receipt. If it matched, this will trigger the posting of payment of the client in the official receipts and updates the invoicing book and accounts receivable ledger. At the end of each week, the collector and the accounting staff prepares a weekly collection report and summary of accounts receivable aging report respectively that will be given to the accounting manager. The aging reports are for internal purposes and to see how many collection the company made. At the end of each month, the accounting manager does bank reconciliation to update the company’s book. She reconciles the passbook with the cash in bank...
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...previous inefficiencies in the budget and a tendency to use the previous budget as a base for the next budget. Q21-4. The minimum level approach establishes a base amount for budget items and requires explanation of justification for any budgeted amount above the minimum. Q21-5. A cost objective’s budget is predicted based on the anticipated consumption of cost drivers. Q21-6. The continuous improvement budgeting concept establishes a budget that has improvements built-in throughout the budgeting period. For a given cost category, the expenditures to provide that cost may be reduced each month of the budget period. Q21-7. The cash budget tends to bring together all of the other budgets. Every budget affects either cash receipts or disbursements directly or indirectly. While not all budget schedules tie directly to cash, somewhere in the system the economic transaction interfaces with either...
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...to help users in making their decision. The key financial statement that this paper will focus on is the statement of cash flows. One of the key benefits of the statement of cash flows is its’ comparability. This is due to the fact that although there are differences in accounting frameworks in the world cash flow statements are produced on almost the same basis. When preparing the statement of cash flows under IFRS and U.S. GAAP there are some differences, however most of the content and format is similar. The following comparison will focus on the similarities and significant differences between U.S. GAAP and IFRS related to the statement of cash flows. A cash flow statement is a financial report that describes the sources of a company’s cash and how that cash was spent over a specified time period. It is useful for determining the short-term viability of a company, particularly its’ ability to pay bills and is generally required by IFRS and U.S. GAAP. One similarity between IFRS and U.S. GAAP in creating the statement of cash flows are both utilize the same format choices and categories. The cash flow statement may be prepared using either the direct or indirect methods. They also utilize the same three categories: operating activities; financing activities; and investing activities. Under IFRS the entity is given the option to prepare statement of cash flows using either the...
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...$190,000 February 210,000 March 230,000 April $230,000 Of Juan’s sales, 30 percent are for cash and the remaining 70 percent are on credit. Of credit sales, 40 percent are paid in the month after sale and 60 percent are paid in the second month after the sale. Materials cost 20 percent of sales and are paid for in cash. Labor expense is 50 percent of sales and it is paid in the month of sales. Selling and administrative expense is 5 percent of sales and is paid in the month of sale. Overhead expense is $12,000 in cash per month; depreciation expense is $25,000 per month. Taxes of $20,000 and dividends of $16,000 will be paid in March. Cash at the beginning of January is $70,000 and the minimum desired cash balance is $65,000.For January, February, and March, prepare a schedule of monthly cash receipts, monthly cash payments, and a complete monthly cash budget with borrowings and repayments. Table 2 Cash Receipts Schedule Sales Credit sales (70%) Cash sales (30%) Collections (month after credit sales) 40% Collections (two months after credit sales) 60% Total Cash Receipts November $120,000 84,000 36,000 December $140,000 98,000 42,000 33,600 January $190,000 133,000 57,000 39,200 50,400 February $210,000 147,000 63,000 53,200 58,800 $146,600 March $230,000 161,000 69,000 58,800 79,800 $175,000 April $230,000 161,000 69,000 64,400 88,200 $207,600 Table 3 Cash Payments...
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...CASE STUDY 3 - Cash Budget Template SCHEDULE OF EXPECTED CASH COLLECTIONS FROM CUSTOMERS: Credit Sales July August September Total Cash Collections August 12,000 14,400 26,400 SCHEDULE FOR EXPECTED PAYMENTS FOR PURCHASE OF INVENTORY Inventory purchases July August September Total Payments for Inventory Purchases August 32,500 22,500 55,000 Oxford Company Cash Budget For the Two Months of August and September Cash balance Add: Receipts Collections from customers Sale of plant assets Sale of new common stock Cash sales Total receipts Total Available Cash Less: Disbursements Purchases of inventory Operating expenses Selling and administrative expenses Dividends Equipment purchase Total disbursements Excess (deficiency of available cash over disbursements) Financing Borrowings Repayments Ending cash balance Please answer the 3 qualitative questions on the next tab called Qualitative Questions. August $10,000 26,400 12,350 51,000 89,750 99,750 55,000 6,750 12,500 19,000 93,250 6,500 3,500 $10,000 September 9,600 10,800 20,400 September 22,500 10,500 33,000 September $10,000 20,400 16,850 39,000 76,250 86,250 33,000 6,750 12,500 6,000 58,250 28,000 (3,570) 24,430 1) 2) 3) What are the three sections of a Cash Budget, and what is included in each section? Cash receipts section: This section includes cash that is expected to be recieved from company activity and customer payments. This includes money coming in from the sale of Cash disbursements...
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...CASE STUDY 3—Cash Budget Template | | | | | | | | | | | | | | | | | | SCHEDULE OF EXPECTED CASH COLLECTIONS FROM CUSTOMERS May | June | 65,800 | | 26,850 | 62,650 | | 22,500 | 92,650 | 85,150 | | | | | | | May | June | 117,000 | | 54,000 | 81,000 | | 25,200 | 171,000 | 106,200 | | | | | | | | | | | May | June | $20,000 | $20,000 | | | 92,650 | 85,150 | 33,000 | | | 50,000 | 75,000 | 57,000 | 200,650 | 192,150 | 220,650 | 212,150 | | | 171,000 | 106,200 | 15,000 | 15,000 | 10,150 | 10,150 | 35,000 | | | 20,000 | 231,150 | 151,350 | (10,500) | 60,800 | | | | | 30,500 | | | (31,008) | $20,000 | 29,792 | | | To see all the figures look above | | | Credit Sales | | | May | June | (94000 x70%) | | 65,800 | | May(89500 x 30%), Jun (89500 x 70%) | | 26,850 | 62,650 | (75000 x 30%) | | | 22,500 | Total Cash Collections | | 92,650 | 85,150 | | | | | | | | | | | SCHEDULE FOR EXPECTED PAYMENTS FOR PURCHASE OF INVENTORY | | | Inventory purchases | | May | June | April(195000 x60%) | | 117,000 | | (135000 x 40%), Jun (135000 x 60%) | | 54,000 | 81,000 | (63000...
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...CASE STUDY 3—Cash Budget Template SCHEDULE OF EXPECTED CASH COLLECTIONS FROM CUSTOMERS Credit Sales May June April 94,000 x 70% 65,800 May 89,500 x 30% June 89,500 x 70% 26,850 62,650 June 75,000 x 30% 22,500 Total Cash Collections 92,650 85,150 SCHEDULE FOR EXPECTED PAYMENTS FOR PURCHASE OF INVENTORY Inventory purchases May June April 195,000 x 60% 117,000 May 135,000 x 40% June 135,000 x 60% 54,000 81,000 June 63,000 x 40% 25,200 Total Payments for Inventory Purchases 171,000 106,200 LBJ Company Cash Budget For the Two Months of May and June May June Cash balance $20,000 $20,000 Add: Receipts Collections from customers 92,650 85,150 Sale of plant assets 33,000 Sale of new common stock 50,000 Cash sales 75,000 57,000 Total receipts 200,650 192,150 Total Available Cash 220,650 212,150 Less: Disbursements Purchases of inventory 171,000 106,200 Operating expenses 15,000 15,000 Selling and administrative expenses 10,150 10,150 Equipment purchase 35,000 Dividends 20,000 Total disbursements 231,150 151,350 Excess (deficiency of available cash over disbursements) (10,500) 60,800 Financing Borrowings 30,500 Repayments (31,008) Ending cash balance $20,000 29,792 Please answer the three qualitative questions on the next tab called Qualitative...
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