1.1 The Definition of Budget, Account Receivables, Debt and Cash

1.
1 The Definition of Budget, Account Receivables, Debt and Cash:
 Budget is a periodic financial plan that is prepared based on a program that has been
ratified and is a written plan regarding the activities of an organization which is
expressed quantitatively and generally expressed in monetary units for a certain
period of time.
 Receivables are the right to collect a number of assets from creditors (lenders) to
debtors (recipients of loans) who are willing to pay them off in the future
 Debt is the debtor's obligation (the borrower) to implement something to the creditor
(lender) for a certain period of time.
 Cash is a payment instrument ready and used to finance the company's general
activities
Types of Accounts Receivable, Debt, and Cash Receivables:
 Accounts receivable: securities, prepaid expenses, collateral deposits, tax receivables,

employee loans, advance accounts receivable, notes receivable, accounts receivable,
other
 Accounts payable: Debt trade, notes payable, income notes received in advance, debt,
tax payable, and interest payable
 Cash (paper / metal) cash, checks, demand deposit, money order etc.
Definition of budget for receivables
The proceeds or payment which the company will receive from its customers who have
purchased its goods & services on credit. Usually the credit period is short ranging from few
days to months or in some cases maybe a year.
The Benefit of Budget for Receivable:

 An effort to increase sales turnover, so that profits can also be increased
 In certain types of businesses, long-term credit can create certain additional benefits
for the company
 Can strengthen trade relations between the company and its relations
There are 6 Factors to Consider in Preparing the Accounts Receivable Budget:

 Sales budget
 The state of competition in the market
 The position of the company in competition
 Payment terms offered by the company
 Company policy in collecting receivables
 The company's plan to make sales on credit of other assets, other than the products
produced
Debt budget
Debt budget that plans systematically and in more detail about the amount of debt along with
its changes from time to time (month) during a certain period to come. from this
understanding, it can be seen that the debt budget in addition to showing the amount of the
company's debt at a certain time, also shows the changes (mutations), either in the form of
additional new debt, or debt reduction as a result of repayment by the company (as the
debtor).
Factors that affect the debt budget

 Expansion
Company expansion is the expansion of capital, both expansion of working capital and fixed
capital, which is used regularly and continuously within the company. This expansion can
increase debt
 Capital structure
Capital structure is a balance or comparison between foreign capital and own capital. Foreign
capital is defined in this regard as long-term and short-term bank loans. While own capital
can be divided into retained earnings and can also be included in the ownership of the
company
Definition of Cash Budget
Cash budget is a budget that plans in more detail about the amount of cash along with
changes over time over the coming period, both changes in the form of cash demand, and
changes in the form of cash distribution.
The main purpose of the cash budget

 Provides an estimate of cash position at the end of each period
 Knowing the advantages or lack of cash in time
 Determine the financing needs or excess cash
 Align cash with capital, income, expenses, investments, and debt
 As a basis for lending policy
The Function of Cash Budget

 Shows the amount and time of the company's cash in the future
 Provide a basis for carrying out remedial action if the amount of cash in the budget
does not match the actual amount
 The cash budget provides a basis for evaluating the performance of financial
managers
Source of cash
 The results of sales of products / services in cash

 The results of billing of company accounts
 Other income such as bank interest, current account services, dividends
 A reduction in fixed assets, such as the sale of assets
 Income outside of income such as bank credit, bond sales
 Addition of own capital by the owner.
2.1 Arranging Debt and Receivable Budget
 Arranging Receivable Budget

To make it easier to understand how to make a debt account, the following will be explained
using a case.
The company's sales plan for 2019 is as follows:
Quarter Sales (in Rupiah)
Quarter I 75,000,000,00
Quarter II 85,000,000,00
Quarter III 100,000,000,00
Quarter IV 140,000,000,00
Based on existing sales plan data, credit sales for a one-month period are 30%. Cash sales
will be given a discount or a 5% discount.
The pattern of receipt of accounts receivable based on the previous period is:
1. According to the agreement of 80%
2. Received in the next quarter by 20%
3. Estimated bad debt or uncollectible receivables of 1%
Other supporting data information:
Sales in the previous period, namely in quarter 3 of 2018 = 90,000,000 and quarter 4 of 2018
= 100,000,000
Then from the information above, you are asked to compile the budget for receivables and
cash in 2019. The methods are as follows:
1. Calculating cash receipts and sales
Quarter Sales Discount 5% Revenue

2.2 Calculating the budget for receivables in 2019
 Arranging Debt Budget

As with other budgets for the debt budget also does not have a standard form that must
be used this means that each company has the freedom to determine the form and format in
accordance with the circumstances of each company.
Based on the payment terms offered by comment material suppliers for 2003, namely:
5/10. n / 30, PT. Mayura sets the policy for purchasing raw materials as follows:
1. As much as 40% of the purchase transaction is made in cash so that it receives a purchase
discount
2. As much as 20% of the purchase transaction, made on credit with repayment made on the
same month as the month the purchase transaction took place, and before the 10 day
deadline, so that it will receive a purchase discount
3. As much as 30% of the purchase transaction is carried out on a redemptive basis made in
the same month as the month the purchase transaction took place, but the deadline is 10
days, so it will not accept the purchase discount.
Thus, for example, the budget for purchasing raw materials for 2003 is as follows:
PT Mayura
Raw Material Purchase Budget
2003
PT Mayura
Debt Budget
2003
3. 1 Preparing Cash Budget
Cash budget is a schedule that is arranged in detail about the cash inflows and
outflows in a certain period for the future. A cash budget can protect a company from being
unprepared for seasonal fluctuations in cash flow or prepare a company to take advantage of
unexpected quantity discounts from suppliers. A cash budget also allows you to evaluate and
plan for your capital needs. The cash budget will help you assess whether there are periods
during your operations cycle when you might need short-term borrowing. It will also help
you assess any long-term borrowing needs. Basically, a cash budget is a planning tool for
management decisions.
There are three main components necessary for creating a cash budget:
1) Time Period
The first decision to make when preparing a cash budget is to decide the period of
time for which your budget will apply. Time period of cash budget could be 3 months,
6 months, or a year.
2) Cash Position
The amount of cash you wish to keep on hand will depend on the nature of your
business, the predictability of accounts receivable, and the probability of fast-
happening opportunities (or unfortunate occurrences) that may require you to have a
significant reserve of cash.
3) Estimated Sales and Expenses
The fundamental concept of a cash budget is estimating all future cash receipts and
cash expenditures that will take place during the time period. The most important
estimate you will make, however, is an estimate of sales. Once this is decided, the rest
of the cash budget can fall into place. Estimated amount should be based the owner’s
experience running the business and goals for the business over the time frame for which
the budget is being created.
Basic formula of cash budget is shown below:
Beginning cash for the period

+ Cash Receipt (ingoing cash flow)
- Cash Payment (outgoing cash flow)
= Ending cash for the period
Categories of cash receipts and cash payment that should be considered in preparing
cash budget are:
Cash balance, cash sales,

Expected Cash Receipt collections of accounts
receivable, other income
Expected Cash Raw material (inventory),
Expenses payroll
Advertising, selling
expenses, administrative
Other Direct Expenses expense, plant and
equipment expenditures,
other payments
Example of Cash Budget in Small Business

1.1 The Definition of Budget, Account Receivables, Debt and Cash

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1 The Definition of Budget, Account Receivables, Debt and Cash:

Types of Accounts Receivable, Debt, and Cash Receivables:

 Accounts receivable: securities, prepaid expenses, collateral deposits, tax receivables,

Definition of budget for receivables

The Benefit of Budget for Receivable:

There are 6 Factors to Consider in Preparing the Accounts Receivable Budget:

Factors that affect the debt budget

Definition of Cash Budget

The main purpose of the cash budget

The Function of Cash Budget

 The results of sales of products / services in cash

2.1 Arranging Debt and Receivable Budget

 Arranging Receivable Budget

Quarter Sales Discount 5% Revenue

 Arranging Debt Budget

3) Estimated Sales and Expenses

Beginning cash for the period

Cash balance, cash sales,

Example of Cash Budget in Small Business

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