Question

Personal budget

At the beginning of the school year, Craig Kovar decided to prepare a cash budget for the months of September, October, November, and December. The budget must plan for enough cash on December 31 to pay the spring semester tuition, which is the same as the fall tuition. The following information relates to the budget:

Cash balance, September 1 (from a summer job)	$8,750
Purchase season football tickets in September	170
Additional entertainment for each month	270
Pay fall semester tuition in September	4,600
Pay rent at the beginning of each month	650
Pay for food each month	600
Pay apartment deposit on September 2 (to be returned December 15)	650
Part-time job earnings each month (net of taxes)	1,300

a. Prepare a cash budget for September, October, November, and December. Enter all amounts as positive values except cash decrease which should be indicated with a minus sign.

Craig Kovar
Cash Budget
For the Four Months Ending December 31
	September		October		November		December
Estimated cash receipts from:
Part-time job		$		$		$		$
Deposit
Total cash receipts		$		$		$		$
Less estimated cash payments for:
Season football tickets		$
Additional entertainment				$		$		$
Tuition
Rent
Food
Deposit
Total cash payments		$		$		$		$
Cash increase (decrease)		$		$		$		$
Plus cash balance at beginning of month
Cash balance at end of month		$		$		$		$

b. Are the four monthly budgets that are presented prepared as (static budgets or flexible budgets)?

c. What are the budget implications for Craig Kovar?

Craig can see that his present plan (will provide OR will not provide) sufficient cash. If Craig did not budget but went ahead with the original plan, he would be $________ (over OR short) at the end of December, with no time left to adjust.

Answer 1

1.

	Sept	Oct	Nov	Dec
Opening cash balance	8750	3110	2890	2370
Add: receipts
Part time job	1300	1300	1300	1300
Deposit				650
Total cash available for expenses [A]	10050	4410	4190	4620
Less: Expenses
Seasonal football tickets	170
Additional entertainent	270	270	270	270
Tution	4600
Rent	650	650	650	650
Foods	600	600	600	600
Deposit	650
Total cash payments [B]	6940	1520	1520	1520
Closing cash balance [A - B]	3110	2890	2670	3100

2. Static Budget

3. Craig can see that his present plan will not provide sufficient cash. If Craig did not budget but went ahead with the original plan, he would be $1500 short [4600 - 3100] at the end of December, with no time left to adjust.