Unit 5 BUSINESS ACCOUNTING
From the following information prepare a Cash Flow Forecast for 12 months starting in January.
Ann Tranter is proposing to take over a knitwear factory which supplies local retailers with effect
from 1st January 2015. Her plans for the first 12 months of trading are given below.
1. The terms of the sale are th at Ann will pay the vendor for the assets of the business valued
as follows on 1st January:-
Warehouse fixtures £35,000
Stocks of raw materials £45,000.
2. The lease is subject to a monthly rental charge of £2,000 payable in the month it is incurred.
3. Ann will retain the two existing warehouse assistants each paid a wage of £500 per month.
4. Other manufacturing staff will cost Ann £7,500 per month for wages and salaries.
5. Sales are expected to be as follows:-
January to April £75,000 per month, May, June, July, August £45,000 per month, September
and October £55,000, November and December £100,000 per month.
10% of each months sales are for cash. Credit customers will pay the remainder two months
after the month of sale.
6. Ann will purchase raw materials each month as follows:-
January to April £45,000. May to August £65,000, September to December £70,000. Ann has
agreed to pay suppliers one month after the purchase.
7. General expenses are expected to be £500 per month.
8. Electricity, etc are expected to be £4000 per quarter.
9. Ann has negotiated a bank loan with the bank manager and expects to receive £60,000 on
30th January 2015.
10. The loan will be repaid in 24 equal instalments.
11. Interest on the loan will be paid at a rate of 5% per annum and will be paid off each month
on the outstanding balance.
12. Ann will have a balance in her bank account on 1st January of £25,000.
13. She plans to purchase a new computer system for the factory office at a cost of £30,000
which will be paid in two equal amounts – one payment in June and the second payment in
December.
14. Maintenance is expected to cost £250 per month.
Complete the Cash Flow Forecast and then provide your observations –
What does the Forecast tell Ann about her business? Will she at any point require a Bank
Overdraft? Is an overdraft facility a good idea for Ann? Can you think of anyone, other than Ann
who might be interested in reading this Cash Flow Forecast?
From the following information prepare a Cash Flow Forecast for 12 months starting in January.
Ann Tranter is proposing to take over a knitwear factory which supplies local retailers with effect
from 1st January 2015. Her plans for the first 12 months of trading are given below.
1. The terms of the sale are th at Ann will pay the vendor for the assets of the business valued
as follows on 1st January:-
Warehouse fixtures £35,000
Stocks of raw materials £45,000.
2. The lease is subject to a monthly rental charge of £2,000 payable in the month it is incurred.
3. Ann will retain the two existing warehouse assistants each paid a wage of £500 per month.
4. Other manufacturing staff will cost Ann £7,500 per month for wages and salaries.
5. Sales are expected to be as follows:-
January to April £75,000 per month, May, June, July, August £45,000 per month, September
and October £55,000, November and December £100,000 per month.
10% of each months sales are for cash. Credit customers will pay the remainder two months
after the month of sale.
6. Ann will purchase raw materials each month as follows:-
January to April £45,000. May to August £65,000, September to December £70,000. Ann has
agreed to pay suppliers one month after the purchase.
7. General expenses are expected to be £500 per month.
8. Electricity, etc are expected to be £4000 per quarter.
9. Ann has negotiated a bank loan with the bank manager and expects to receive £60,000 on
30th January 2015.
10. The loan will be repaid in 24 equal instalments.
11. Interest on the loan will be paid at a rate of 5% per annum and will be paid off each month
on the outstanding balance.
12. Ann will have a balance in her bank account on 1st January of £25,000.
13. She plans to purchase a new computer system for the factory office at a cost of £30,000
which will be paid in two equal amounts – one payment in June and the second payment in
December.
14. Maintenance is expected to cost £250 per month.
Complete the Cash Flow Forecast and then provide your observations –
What does the Forecast tell Ann about her business? Will she at any point require a Bank
Overdraft? Is an overdraft facility a good idea for Ann? Can you think of anyone, other than Ann
who might be interested in reading this Cash Flow Forecast?
