- 10 Marks
Question
Cash Collected from Debtors and Payments to Creditors
The following balances have been extracted from the Statement of Financial Position of Zena LTD as at 31 December 2023:
| Account | Amount (GH¢) |
|---|---|
| Debtors | 55,000 |
| Creditors | 60,000 |
Additional information from the 2024 budget:
- Sales are GH¢250,000 out of which 25% is cash. The sales are evenly distributed and the business gives one-month credit to its customers.
- Total purchases of GH¢180,000, evenly distributed, are all on credit. Suppliers allow two months’ credit.
Required:
i) The cash to be collected from debtors during the year.
ii) The cash to be paid during the year.
Answer
Cash to be collected from debtors:
| Description | Amount (GH¢) |
|---|---|
| Credit Sales | 187,500 |
| Add debtors b/d | 55,000 |
| Total to be collected | 242,500 |
| Less debtors c/d (25% of 250,000) | 15,625 |
| Cash to be collected | 226,875 |
ii) Cash to be paid during the year:
| Description | Amount (GH¢) |
|---|---|
| Total Purchases | 180,000 |
| Add creditors b/d | 60,000 |
| Total to be paid | 240,000 |
| Less creditors c/d (2/12 of 180,000) | 30,000 |
| Cash to be paid | 210,000 |
- Tags: Budgeting, Cash Collection, Creditors, Debtors
- Level: Level 1
- Topic: Cash Budgeting and Working Capital
- Series: Nov 2024
- Uploader: Salamat Hamid