What is a cash budget? How is cash budget useful in managerial decision making? -MBA Notes

Answer:

Cash budgeting is the process of forecasting the expected receipts known  as cash inflows, and

expected payments known as cash outflows to meet the future  obligations. The  written  statement  of receipts  and  payments  is known as  the cash budget.

A  proper  control  over  cash  is  very  essential.  Cash  is  an  important component in any activity.
The control becomes inescapable. If cash is not properly  managed  or  if  it  is  mismanaged,  the  ultimate  result  would  be disastrous. In many times and in many business situations, business failures are noticed due to the lacunae found in the cash management. Hence cash budgeting occupies a pivotal place in the study of Financial Management.  

It is a crystal ball which enables one to observe the future movements in cash position. It is a mere forecast of cash position of  an  undertaking  for  a  definite  period  of  time.   

The  period  may  be  daily, weekly,  monthly,  quarterly,  semi-annually,  or  annually.  The  major  two
components  of  cash  budget  would  be  forecast  first  the  cash  receipts  and
then second forecasting the cash disbursements.

The receipts of cash are formatted as follows:

1.  Opening balance of cash in hand and cash at bank

2.  Cash sales

3.  Collection from debtors to whom sales are effected on credit basis

4.  College from Bills received

5.  Interest and advances and loans granted

6.  Dividends received from investments

7.  Sale proceeds from capital assets

8.  Proceeds from issue of shares and debentures

9.  Other sources.

# MBA Notes

# MBA Assignment

# Accounting Notes