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CA Intermediate · Cost and Management Accounting · Budgets and Budgetary Control

A cash budget shows opening cash of Rs 50,000. Budgeted receipts for the month are Rs 4,20,000. Payments include wages Rs 1,10,000, purchases Rs 2,40,000, and depreciation Rs 30,000 (included in the expense list given by the accountant as a cost). Cash payments for other expenses are Rs 60,000. What is the closing cash balance?

Closing cash is Rs 60,000. Depreciation is a non-cash expense and is left out of the cash budget, so payments are 1,10,000 + 2,40,000 + 60,000 = Rs 4,10,000, deducted from opening cash plus receipts of Rs 4,70,000.

  1. ARs 60,000Correct
  2. BRs 30,000
  3. CRs 90,000
  4. DRs 20,000

Explanation

Depreciation is a non-cash item and is excluded. Cash available = 50,000 + 4,20,000 = 4,70,000. Payments = 1,10,000 + 2,40,000 + 60,000 = 4,10,000. Closing balance = Rs 60,000. Rs 30,000 results from wrongly deducting depreciation too.

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