Question

The cash budget consist of what four sections?

Answer 1

A cash budget consists of four sections: 1) opening cash balance, 2) cash receipts or inflows, 3) cash disbursements or outflows, and 4) closing cash balance. It is a crucial tool for assessing economic performance and financial planning in any business.

Step-by-step explanation:

The cash budget is an essential financial plan that typically consists of four key sections:

1. Opening cash balance - The beginning balance of cash available at the start of the period.
2. Cash receipts or inflows - This includes all expected cash receipts during the period such as sales revenue, accounts receivable collections, and any other income.
3. Cash disbursements or outflows - These are the anticipated cash payments or expenses during the period, which can include operating expenses, inventory purchases, and capital expenditures.
4. Closing cash balance - The final section is the closing cash balance, which is calculated by adding the cash inflows to the opening balance and subtracting the cash outflows. This gives the ending cash position for the period.

Creating a cash budget helps in evaluating economic performance and is essential for maintaining liquidity and planning for surpluses or deficits in a business. It plays a critical role in managerial decision-making processes and strategic financial planning.