Registered Posts: 141 ? ? ?
Hi im studying unit 15 via diploma pathway distance learning and am currently at revision stage after completing all the initial study, re-writing my notes and completing questions.

Today im struggling though and have cam across a number of questions i just cant get to match the answers in the bpp text and some i just dont even know how to approach that the course material hasnt covered as such think your just to work out how to approach it!?

My simulation is at the end of oct so time is ticking - this is the first unit ive struggled with a bit pass, 30,31,5 and 6 all first time and have unit 11 and 33 booked for dec exams

the first one im stuck with and would really appreciate some help with is:

The text has the question as

Sarhall Ltd has budgeted sales for June 100,000, for July 120,000 and for August 80,000. 20% of sales are for cash and 80% are on credit. Of the credit sales 60% are paid within 30days and the balance is paid in 60 days. bad debts amount to 1% of sales. What figure for receipts from debtors should be included in the cash flow forecast for august?

My workings and answer to the question are as follows

June July August
Sales 100,000 120,000 80,000
Cash 20,000 24,000 16,000 (20% of total sales)
Credit 79000 94800 63200 (credit figure worked out as 80% of total sales less 1% of sales for bad debts)

Receipts for August

June sales - 79000 x 40%=31600
July sales - 94800 x 60%=56880
August sales - 16000 cash sales

Total receipts= 31600+56880+16000=104,480

Cash 20% august sales 16000
Credit 48% july sales 57600
31% june sales 31,000

Total 104,600

Please can you explain where the percentages in the answer provided have came from? i do not understand where the percentages of 48% and 31% have came from and why these percentages have been used?

Hopefully someone will be along to help me very shortly and if so i may even try get some help on my other questions. I have emailed bpp but i wont even get a response for at least 2 working days and from previous experience i have had to chase that even!

Thanks

Lisa

• Registered Posts: 465 Dedicated contributor ? ? ?
Here's my attempt, hope it's ok

July 80% * 60% = 48 % (Of the 80% Credit Sales, 60% paid 30 Days)
June 80% * 40% = 32% * 99% = 31% (Of the 80% Credit Sales 40% Paid 60Days less 1% Bad Debts)

The answer seems to come out at 31.68 % so this may be wrong, although think this is heading in right direction.
• Registered Posts: 141 ? ? ?
thanks for this

yes see that makes sense now you have put an explanation of how you got 48% and 31%, it really frustrates me how in the book there is no explanation or even working of where these percentages came from!!

it also frustrates me how all through the course companion the worked examples are done more like ive answered it than the way they have in this question, at leats cover both so we learn how to tackle both

does anyone know if there is any additional revision material for unit 15 you can purchase? i have the bpp course companion, revision companion and passcards

thanks
• Registered Posts: 465 Dedicated contributor ? ? ?
Apologies, the 31% is simply just the 32% (80% x 40%) less 1% for bad debts, this brings the total back up to the full 80% eg.

July 48%
June 31%
Total 80% (Representing the 80% Credit Sales)
• Registered Posts: 141 ? ? ?
thanks, so i could do it the way i can see it in my head too and forget the percentages of 48% and 31% as that is what confused me i think?

100,000*80%=80,000*40%=32000-1000=31000

july 120,000*80%=96000*60%=57600

aug 16000

31,000+57,600+16,000=104,600

looks like all ive done actually is try to take the bad debts off at the beginning making the credit sales figure incorrect instead of doing it at the 60days step

its so much quicker posting here than emailing bpp i wonder when ill get a response and whether it will even explain it as well as you have!!

The following items have been extracted from a companys budget for next month

Sales on credit 240,000
Expected increase in stock next month 20,000
Expected decrease in trade debtors next month 12,000

The budgeted receipt from trade debtors next month is 252,000 true or false?

and similar;

The following items have been extracted from a companys budget for next month

Purchases on credit 360,000
expected decrease in stock over month 12,000
expected increase in trade creditors over the months 15,000

what is the budgeted payment to trade creditors for the month?

333,000, 345,000, 357,000 or 375,000

Not really sure how to tackle these at all at least the other one appears that i just did something in the wrong order!

thanks
• Registered Posts: 465 Dedicated contributor ? ? ?
Hello, Im afraid I don't know 100% either

The following will have an effect on cash flow as follows:

Expected Increase Stock of 20,000 (This will have a negative effect - less stock has been sold)
Expected Decrease Debtors of 12,000 (Positive effect - more debtors have paid us)

Expected Decrease in Stock 12,000 (Positive - less stock has been pruchased)
Increase in Trade Creditors 15,000 (Positive- paid less cash out to our creditors)
• Registered Posts: 585
lisnic wrote: »

The following items have been extracted from a companys budget for next month

Sales on credit 240,000
Expected increase in stock next month 20,000
Expected decrease in trade debtors next month 12,000

The budgeted receipt from trade debtors next month is 252,000 true or false?

and similar;

The following items have been extracted from a companys budget for next month

Purchases on credit 360,000
expected decrease in stock over month 12,000
expected increase in trade creditors over the months 15,000

what is the budgeted payment to trade creditors for the month?

333,000, 345,000, 357,000 or 375,000

Not really sure how to tackle these at all at least the other one appears that i just did something in the wrong order!

thanks

I think you are not giving the full picture of your problem. It is unlikely that you will have to work our debtors and creditors from your sales figure only. you may already have an opening debtors figures at the begining of the problem. we know that 80% of each month's TOTAL SALES= CREDIT SALES is added to debors but 60% of previous month credit sales (30 days old) is taken off and 40% of of 2 months credit sales taken off (60 days) -included 1% bad debt write off-

same as above for creditors- don't have full details of payment to suppliers - so can not advise

increase in stock means next month £20000 extra cash out flow to buy additional stock

increase in creditors means next months less cash flow out of 15000 in creditors settlement

if you post the whole question I can do it for you, or alternatively PM it to me.

I have a very good hand out, easy to follow, that I can e-mail it to you. it expains how to tackle cash flow step by step. if you want it post your e-mail or pm it to me
• Registered Posts: 2 New contributor ?

JUNE

to find the amount of credit sales
100000*80%=80000

to find the amount paid in August
80000*40%=32000

32000-1%= 31680

JULY

to find the amount of credit sales
120000*80%=96000

tofind the amount paid in august
96000*60%=57600

57600-1%

August

to find the cash sales
80000*20%=16000

Total cash receipts in August
31680+57600+16000=105280
• Registered Posts: 2 New contributor ?

JUNE

to find the amount of credit sales
100000*80%=80000

to find the amount paid in August
80000*40%=32000

32000-1%= 31680

JULY

to find the amount of credit sales
120000*80%=96000

tofind the amount paid in august
96000*60%=57600