Problem
KAB Inc., a small retail store, had the following results for May. The budgets for June and July are also given.
May June July
(actual) (budget) (budget)
Sales R 84 000 R 80 000 R 90 000
Less cost of goods sold R 42 000 R 40 000 R 45 000
Gross margin R 42 000 R 40 000 R 45 000
Less selling and administrative expenses R 40 000 R 40 000 R 40 000
Net operating income R 2 000 R 0 R 5 000
Sales are collected at 60% in the month of the sale and the balance in the month following the sale. (There are no bad debts.) The goods that are sold are purchased in the month prior to the sale. Suppliers of the goods are paid in the month following the sale. The "selling and administrative expenses" are paid in the month of the sale.
Required:
1. Prepare a cash receipts budget for May, June and July (4)
2. Prepare a Purchases budget for April, May and June (3)
3. Prepare a disbursements budget for May, June and July (3)