Q. Define the Cash Budget?
Cash Budget: - A cash budget is an estimation of cash receipts and cash payments for a future period of time. It is prepared to predict the cash requirements for a given period and indicates the surplus or shortage of cash during the budget period. There are two division of cash budget:
- Cash Receipts: - Cash is mostly received from collection from debtors, cash sales, income from investments etc.
- Cash Payments :- Cash is mostly paid for payment to creditors, cash purchases, payment for expenses etc.
By estimating the cash receipts as well as cash payments for a future period it can be estimated that in which months there will be surplus cash and in which months there will be deficiency of cash resources.