Schedule of Expected Cash Collections
Schedule of expected cash collections from customers shows the budgeted cash collections on sales during a period. It is a component of master budget and it is prepared after the preparation of sales budget and before the preparation of cash budget.
The calculation of expected cash collections is based on the total sales figure obtained from sales budget. The management estimates the proportion in which sales are expected to be collected in the current and following periods. This is used to determine how much sales are expected to be collected during a period.
Format and Example
The master budget of Company A continues here with the preparation of schedule of expected cash collections. The sales figures are obtained from the sales budget of the company. 70% of sales are expected to be collected in the quarter in which sales are made and the rest are expected to be collected in the next period. Bad debts are negligible.
a) Q1 Sales = $120,120
Collections in Q1 = $120,120 × 70% = $84,084; Collections in Q2 = $120,120 × 30% = $36,036
b) Q2 Sales = $87,768
Collections in Q2 = $87,768 × 70% = $61,438; Collections in Q3 = $87,768 × 30% = $26,330
c) Q3 Sales = $106,991
Collections in Q3 = $106,991 × 70% = $74,894; Collections in Q4 = $106,991 × 30% = $32,097
d) Q4 Sales = $197,792
Collections in Q4 = $197,792 × 70% = $138,454
|Schedule of Expected Cash Collections|
|For the Year Ending December 30, 2010|
|Quarter 1 Sales (a)||84,084||$36,036||120,120|
|Quarter 2 Sales (b)||61,438||$26,330||87,768|
|Quarter 3 Sales (c)||74,894||$32,097||106,991|
|Quarter 4 Sales (d)||138,454||138,454|
Written by Irfanullah Jan