A company expects to have Rs. 37,500 cash in hand on 1st April, and requires you to prepare an estimate of cash position during three months.

Steps to Solve

1. Gather the Cash Data Collect the initial cash balance and the operations data for April, May, and June. The initial cash balance is Rs. 37,500.

2. Calculate Cash Inflows from Sales Determine total cash from sales. Since 20% of sales are in cash, calculate:

• April: $52,500 \times 0.20 = 10,500$
• May: $1,20,000 \times 0.20 = 24,000$
• June: $1,35,000 \times 0.20 = 27,000$

3. Sum Total Cash Inflows Add up the inflows from sales: $$ \text{Total Cash Inflows} = 10,500 + 24,000 + 27,000 $$

4. Calculate Cash Outflows Identify and sum all cash outflows based on expenses and obligations:

• Factory Expenses: Cash payments delayed by one month.
  • April: Rs. 9,000 (previous month)
  • May: Rs. 11,250 (current month)
  • June: Rs. 14,000
• Office & Selling Expenses: Same procedure for each month’s office and selling expenses.

5. Calculate Additional Outflows Consider the delayed tax payment and dividends due in April:

• Income tax: Rs. 57,500 (due in June)
• Dividend payments in April: Rs. 37,500

6. Calculate Net Cash Position Net Cash Position for each month is calculated as: $$ \text{Net Cash} = \text{Initial Cash} + \text{Total Cash Inflows} - \text{Total Cash Outflows} $$

7. Prepare Cash Position Statement Present the cash position statement clearly with the values calculated for each month.