Question

One hundred per cent (100%) of sales made by a firm is sold on credit. Experience...

One hundred per cent (100%) of sales made by a firm is sold on credit. Experience shows the firm collects cash for 30% of credit sales in the month of the sale, 50% in the following month, and the remaining 20% the month after.

The total sales achieved in June and July were $6,000 and $7,000 and the budget for August, September and October are $8,000, $7,500 and $7,500 respectively.

Required:

Produce a Schedule of Receipts showing the expected cash collections for August, September and October.

Business   Accounting   
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Answer #1

Schedule of Receipts

For August, September and October

August September October
Cash collection fron June sales 6,000 x 20% = 1,200 0 0
Cash collection fron July sales 7,000 x 50% = 3,500 7,000 x 20% = 1,400 0
Cash collection fron August sales 8,000 x 30% = 2,400 8,000 x 50% = 4,000 8,000 x 20% = 1,600
Cash collection fron September sales 0 7,500 x 30% = 2,250 7,500 x 50% = 3,750
Cash collection fron October sales 0 0 7,500 x 30% = 2,250
Total cash collection $7,100 $7,650 $7,600
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