Captial Budget

Chester & Wayne- Cash Budget

Chester & Wayne- Cash Budget

Introduction

One major concept that a company must learn to ensure their operations are running efficiently is learning how to develop a budget. According to Schneider (2012) a budget can be used by a company for planning purposes, not only to plan on what to do in the future, but to assure a future for the company. Not only does a budget help in the company’s planning process, but helps in developing the company’s control system. In this paper, the cash budget for the company Chester & Wayne will be reviewed to determine what the quarter budget total will be. As part of this review, the company’s current practices will be reviewed to determine if any changes need to be made to the company’s current practices.

Prepare the cash budget

For the first part of the review a cash budget will be prepared with the current financial information, and with the predicted income. This cash budget will allow Chester & Wayne to see if they are operating efficiently and within their desired minimum cash balance at the end of each month. Below is the cash budget.

After preparing the cash budget using the company´s current operations information, the company is operating as desired with at least a minimum cash balance at the end of each month of $120,000. This cash budget used the data that the company will receive $24,000 in rent for the unused warehouse space that is being rented out. The cash budget also includes the actual and budget sales, the equipment that will be acquired in November, and the dividends of $45,000 that will be paid in December. This information can be presented to the owners, Chester and Wayne, which they can then use the cash budget to determine if they would like to make any changes. The owners can also use the cash budget to determine if there are any risks that the company can identify and adapt to. “A company´s cash levels can vary considerably over time depending on...