Question

1.Why is it important to draw up Cash Budget? 2.What are the two items not in a projected income statement? Thanks in Advance. :)

Answer 1

1.) A cash budget is very important, especially for smaller companies. It allows a company to establish the amount of credit that it can extend to customers without having problems with liquidity. A cash budget helps avoid a shortage of cash during periods in which a company encounters a high number of expenses.

2.) The two items not in a projected income statement are:-

* Extraordinary Items: These items are gains or losses in a company's financial statements that are unlikely to happen again.

* Nonreccuring Items: A nonrecurring item refers to an entry that is infrequent or unusual that appears on a company's financial statements.