The paper “ Cash Budget, Income Statement and the Statement of Financial Position” is an affecting example of a finance & accounting assignment. The statement presents the cash budget, income statement, and the statement of financial position for the six months ended September 30. In the forecasting of the cash budget, the effect of inflation has been ignored. During the six months period, inflation is expected to rise and it will impact all the variables of the projections. In addition, it has been assumed, in the cash flow forecast, that the credit sales will be settled at the end of two months.
The same assumption has been applied in the cost of purchases which is being assumed to be settled at the end of the next month in which the sales were made. It has also been assumed that purchases, in order to maintain the inventory level to £ 10,000, are included in the total cost of purchase. In the income statement, it has been assumed that China glass and cutlery, bed linen and towel, and miscellaneous items including toiletries are revenue expenditure and will be consumed entirely during the current period.
The loss in inventory is proportionately divided between the two half of the years and half of the expected loss is taken. The corresponding impact has been taken in the inventory. Task 2As per the given scenario, the average spending has decreased by 15% which means that the average spending in actual turned out to be 127.5. If we substitute this figure with the current expected occupancy rate, the revenue is likely to decrease. The following table presents the revised income statement Income Statement In £ For the six months ended September 30,20X0 Revenue 386,325 Cost of Purchases (77,265) China glass and cutlery (10,000) Bed linen and towel (10,000) Miscellaneous items including toiletries (5,000) Labor Cost (77,265) Overhead Cost (96,581) Depreciation (133,167) Losses in inventory (1,000) Net loss (23,953) As apparent from the above table, the net loss has further increased which would adversely affect the financial outlook of the company.
In order to maintain the previous less of profitability (in this case net loss of 92), the company is required to maintain the same level of sales. This can only be done by increasing the level of occupancy so that the sales remain the same at £ 454,500.
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