Renata has the following budgeted business transactions for the month of May 2020: insurance refund received: £500; payments to be made to materials suppliers: £15,000; payments to be made to employees: £4,000; cash expected from customers: £25,000; budgeted depreciation charge on non-current assets: £800; budgeted interest paid to bank: £40; personal drawings: £2,000. At 1 May 2020, Renata is budgeteding an overdraft at the bank of £4,000. What is Renata's budgeted cash position at the end of May 2020?
A) £340 overdrawn
B) £340 cash in the bank
C) £460 cash in the bank
D) £460 overdrawn

Question

Quizplus · Accepted Answer

Renata's budgeted cash position is calculated by starting with the initial overdraft of £4,000, adding cash inflows (£500 insurance refund + £25,000 from customers), and subtracting cash outflows (£15,000 to suppliers + £4,000 to employees + £40 interest + £2,000 personal drawings). Depreciation is a non-cash expense and does not affect cash flow. The calculation is: -£4,000 + £500 + £25,000 - £15,000 - £4,000 - £40 - £2,000 = £460 cash in the bank.

Renata Has the Following Budgeted Business Transactions for the Month