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CMA Intermediate · Financial Management and Business Data Analytics · Management of Cash and Cash Equivalents

Kaveri Ltd has an opening cash balance of Rs 50,000 for a month. Expected receipts are Rs 3,20,000 and payments are Rs 3,45,000, including Rs 15,000 of depreciation wrongly included by the clerk. The minimum cash balance required is Rs 60,000. What is the surplus or shortfall against the minimum balance, after correcting the error?

After removing the non-cash depreciation, payments are Rs 3,30,000, so closing cash is Rs 50,000 + Rs 3,20,000 - Rs 3,30,000 = Rs 40,000. Against the Rs 60,000 minimum, there is a shortfall of Rs 20,000.

  1. AShortfall of Rs 20,000
  2. BShortfall of Rs 5,000Correct
  3. CSurplus of Rs 10,000
  4. DShortfall of Rs 35,000

Explanation

Correct payments = 3,45,000 - 15,000 = 3,30,000. Closing cash = 50,000 + 3,20,000 - 3,30,000 = 40,000. Against the minimum of 60,000 this is a shortfall of Rs 20,000. Rs 35,000 uses the uncorrected figures: 50,000+3,20,000-3,45,000 = 25,000, shortfall 35,000.

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