Cash Budget for the Months of January to March - Essay Example

A cash flow budget is a forecast of when you expect to receive cash from your sales and when you expect to pay your bills. The cash flow is not an estimate of your sales and expenses; rather it is an estimate of when the money associated with sales or in any other income-generating account will be received and when the money paying the expenses will be paid out. Budgeted Profit and Loss differs from a budgeted cash inflow or outflow where much of the data for the budgeted income statement comes from other budgets already prepared. For example, sales figures come from the sales budget. The cost of goods sold is based on the unit cost of production (and the direct materials budget).

The direct labor budget provides labor cost information. And the manufacturing overhead budget provides overhead cost information. While a cash budget, merely provides a forecast of cash disbursements and cash realization. D) PRINCIPLES OF GOOD BUDGETING ARE NOT ALWAYS FOLLOWED IN PRACTICE because of different types of constraints. One of which is the financial stability of the business and the industry. Rising prices and rising costs of different materials for a manufacturing business, for example, have one of the greatest effects on the business, it has to make the company cut its expenses and therefore has a direct effect on the forecasted financial statement.

Even though there are several ways in making sure that projections do happen, it is still subjected to uncertainty the occurrence of which can greatly affect the financial standing of the company. There are also instances that a good budget is not always effective when there is a personal interest involved in the project, that is, the management or any person attached to a certain project has its own goal that is detrimental to the company. Therefore, proper ‘attitude’ should be observed and there must be a common goal towards a certain action. E) ESTIMATING SALES FOR THE NEXT ACCOUNTING PERIOD is done thru a forecast or a budget.