Revenue and cash budgets

Definition

Revenue budgets are primarily concerned with Sales Income or income generated in other ways. Revenue needs to be scheduled as to when it is expected to come in and how it is to be allocated. This is part of the function of the Cash Budget.

Explanation

The operating budget is prepared in terms of revenues and expenses. For financial planning purposes, it translates into cash receipts and cash disbursements. This is the cash budget. Cash budgets ensure that the company has enough, but not too much, cash on hand during the period ahead.

Preparation of a cash budget

  • Calculate and project forward cash receipts and cash disbursement items.

Remember:


  • Exclude depreciation and other non-cash items from the cash budget.
  • Round-up figures. This is normal in budgets. The users of the budget do not need precise estimates. Rounded-up whole numbers are adequate.
Also Check:  Manpower Budget Definition

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