60.1K

Verified Solution

Link Copied!

Noor Ltd is a wholesale business. The junior management accountant of the firm provided you with the following incomplete monthly budgeted Profit & Loss statements for the six - month period of 20X5. Junior accountant needs your assistance with completion of budgeted Profit & Loss Statements and constructing budgeted monthly Cash flows statements for the same period.

- The following information is relevant to preparation of the budgeted Profit & Loss Statements:

- Sales in September, October, November and December are expected to grow at 2% monthly.

- Cost of goods sold of each month is estimated to represent 80% of the sales of the relevant month.

- Administration and distribution expenses of each month are planned at 5% of the sales of jhnthe relevant month.

The following information is relevant to preparation of the monthly cash budgets.

Noor Ltd gives all its customers one month credit.

Sales revenue in June 20X5 is expected to be GBP 49,000

Inventory purchases are made on one months credit.

June 20X5 purchases are estimated to be GBP 39,000.

Assume that cost of goods sold is equal to purchases (all inventories are sold out in the same month)

Administration, distribution expenses and other overheads are paid in the month concerned.

The business plans to buy and pay for a new van in August 20X5. The cost of this van is GBP 30,000. The business expects to have a cash balance of GBP 10,000 at the beginning of July 20X5.

You are required to:

1. Complete the budgeted Profit & Loss Statements.

2. Prepare a cash budget for the six month period of 20X5 as provided to you below by the junior accountant.

3. Comment on any cash problems Noor Ltd can face in the future based on prepared cash budgets. Suggest what measures Noor Ltd could consider in order to avoid any cash problems in the future.

The following cash budget form was provided to you by the junior accountant.

D1 Use critical reflection to evaluate own work and justify valid conclusions

Learners should show evidence that the recommendations made are valid and realistic which would lead to an improvement in the cash flows of the business

Budgeted P&L for 6 months 20X5 In GBP Sales Cost of goods sold Jul 50,00050,000 Au Se Oct Nov Dec Gross profit Admin and Distribution 3,000 2,000 3,000 2,000 3,000 2,000 3,000 2,000 3,000 2,000 Depreciation 3,000 Other Overheads Net Profit 2,000

Answer & Explanation Solved by verified expert

See Answer