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12.15 Trade Receivables (Debtors) Budget This budget helps to estimate the amount owed to the business by its trade receivables (debtors) at the end of a specific period say one month. In this budget the company incorporates information about the rate at which goods are sold on credit, collection from receivables, discounts allowed to receivables, receivables written off as irrecoverable debts etc. Trade receivables (debtors) budget Months 1 2 3 4 Trade receivables (debtors) at start xxxx xxxx xxxx xxxx Add Credit sales xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx Less Cash received from trade receivables (debtors) xxxx xxxx xxxx xxxx Bad debts xxxx xxxx xxxx xxxx Discount allowed xxxx xxxx xxxx xxxx Trade receivables (debtors) at end xxxx xxxx xxxx xxxx Cash sales and transactions relating to cash sales are not included in trade receivables (debtors) because we know that trade receivables (debtors) arise due to credit sales and not because of cash sales. EXAMPLE 5 Unique traders run a seasonal business, with their sales peaking in December. The following sales figures are related to the months of September 20X7 to January 20X8. The figures from November are based on estimates. All sales are on credit basis. September October November December January $98 000 $120 000 $160 000 $250 000 $104 000 40% of sales are paid for in the current month and attract a discount of 5%. 42% of sales are paid for in the month following the month of sale and attract a discount of 2%. 18% of credit sales are paid for two month following the month of sale and attract no discount. Trade receivable at 31 October 20X7 were $89 640. REQUIRED Draw up an estimated Trade receivable budget for each of three months commencing November 20X7. SOLUTION Trade receivables (debtors) Budget For the three months commencing November 20X7 Months November ($) December ($) January ($) Trade receivables (debtors) at start 89 640 117 600 178 800 Add Credit sales 160 000 250 000 104 000 249 640 367 600 282 800 Less Cash received from trade receivables (debtors) Current month sales ラ 40% ラ 95% 60 800 95 000 39 520 Last month sales ラ 42% ラ 98% 49 392 65 856 102 900 Two months earlier sales ラ 18% 17 640 21 600 28 800 Discount allowed 4 208 6 344 4 180 132 040 188 800 175 400 Trade receivables (debtors) at end 117 600 178 800 107 400 12.16 Trade Payables (Creditors) Budget

Trade Receivables and Payables Budgets

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  • 12.15 Trade Receivables (Debtors) BudgetThis budget helps to estimate the amount owed to the business by its trade receivables (debtors) at the end ofa specific period say one month. In this budget the company incorporates information about the rate at whichgoods are sold on credit, collection from receivables, discounts allowed to receivables, receivables written offas irrecoverable debts etc.

    Trade receivables (debtors) budget

    Months1 2 3 4

    Trade receivables (debtors) at start xxxx xxxx xxxx xxxxAdd Credit sales xxxx xxxx xxxx xxxx

    xxxx xxxx xxxx xxxxLess Cash received from trade receivables (debtors) xxxx xxxx xxxx xxxx

    Bad debts xxxx xxxx xxxx xxxxDiscount allowed xxxx xxxx xxxx xxxx

    Trade receivables (debtors) at end xxxx xxxx xxxx xxxx

    Cash sales and transactions relating to cash sales are not included in trade receivables (debtors) because weknow that trade receivables (debtors) arise due to credit sales and not because of cash sales.

    EXAMPLE 5Unique traders run a seasonal business, with their sales peaking in December. The following sales figures arerelated to the months of September 20X7 to January 20X8. The figures from November are based on estimates.All sales are on credit basis.

    September October November December January$98 000 $120 000 $160 000 $250 000 $104 000

    40% of sales are paid for in the current month and attract a discount of 5%.42% of sales are paid for in the month following the month of sale and attract a discount of 2%.18% of credit sales are paid for two month following the month of sale and attract no discount.Trade receivable at 31 October 20X7 were $89 640.REQUIREDDraw up an estimated Trade receivable budget for each of threemonths commencing November 20X7.SOLUTION

    Trade receivables (debtors) Budget

    For the three months commencing November 20X7Months

    November ($) December ($) January ($)Trade receivables (debtors) at start 89 640 117 600 178 800Add Credit sales 160 000 250 000 104 000

    249 640 367 600 282 800Less Cash received from trade receivables (debtors)

    Current month sales 40% 95% 60 800 95 000 39 520Last month sales 42% 98% 49 392 65 856 102 900Two months earlier sales 18% 17 640 21 600 28 800

    Discount allowed 4 208 6 344 4 180132 040 188 800 175 400

    Trade receivables (debtors) at end 117 600 178 800 107 400

    12.16 Trade Payables (Creditors) Budget

  • This budget helps to estimate the amount owed by the business to its trade payables (creditors) at the end of aspecific period say one month. In this budget the company incorporates information about the extent to whichthe company makes purchases on credit, rate at which payments are made to suppliers, discounts receivedfrom trade payables (creditors) etc.

    Trade payables (creditors) Budget

    Months1 2 3 4

    Trade payables (creditors) at start xxxx xxxx xxxx XxxxAdd Credit purchases xxxx xxxx xxxx Xxxx

    xxxx xxxx xxxx XxxxLess Cash paid to trade payables (creditors) xxxx xxxx xxxx Xxxx

    Discount received xxxx xxxx xxxx XxxxTrade payables (creditors) at end xxxx xxxx xxxx Xxxx

    As we know that trade payables (creditors) arise due to credit purchases and not due to cash purchases so cashpurchases and related transactions are not included in trade payables (creditors) budget

    EXAMPLE 6The following purchases (all on credit) figures are estimated for the months of March 20X6 to July 20X6.

    March April May June July$68 000 $72 000 $80 000 $92 000 $88 000

    20% of purchases are paid for in the current month and attract a discount of 4%.48% of purchases are paid for in the month following the month of purchases and attract a discount of2.5%.32% of purchases are paid for two month following the month of purchases and attract no discount.Trade payable at 30 June 20X6 were $79 360.REQUIREDDraw up an estimated Trade payable budget for each of the threemonths ending July 20X6.SOLUTION

    Trade payables (creditors) Budget

    For the three months ending July 20X6Months

    May ($) June ($) July ($)Trade payables (creditors) at start 79 360 87 040 99 200Add Credit purchases 80 000 92 000 88 000

    159 360 179 040 187 200Less Cash received from trade payables (creditors)

    Current month purchases 20% 96% 15 360 17 664 16 896Last month purchases 48% 97.5% 33 696 37 440 43 056Two months earlier purchases 32% 21 760 23 040 25 600

    Discount received 1 504 1 696 1 80872 320 79 840 87 360

    Trade payables (creditors) at end 87 040 99 200 99 840

    MUHAMMAD NAUMAN MALIKLAHORE PAKISTAN