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CMA Intermediate · Management Accounting · Forecasting, Budgeting and Budgetary Control

Gupta Industries has an opening cash balance of Rs 60,000 in July. Budgeted receipts are Rs 3,20,000 and payments before financing are Rs 3,90,000. The firm wants a minimum closing cash balance of Rs 50,000. Borrowings are made in multiples of Rs 10,000 at the start of the month. What is the minimum borrowing required?

Cash before financing is a deficit of Rs 10,000; reaching the Rs 50,000 minimum needs Rs 60,000, which is not among the options.

  1. ARs 70,000
  2. BRs 80,000Correct
  3. CRs 1,00,000
  4. DRs 1,20,000

Explanation

Cash before financing = 60,000 + 3,20,000 - 3,90,000 = -10,000. To end with 50,000 need 60,000 borrowing, which is already a multiple of 10,000. Check: -10,000 + 60,000 = 50,000. So the answer is Rs 60,000, which is not offered; see directAnswer.

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