Vieira popover Ltd (Example 6.1) now wishes to prepare its cash budget for the second six months of the year. The budgeted income statements for each month of the second half of the year are as follows:

 

July		Aug	Sept	Oct	Nov	Dec
£000		£000	£000	£000	£000	£000
Sales revenue	57	59	62	57	53	51
Cost of goods sold	(32)	(33)	(35)	(32)	(30)	(29)
Salaries and wages	(10)	(10)	(10)	(10)	(10)	(10)
Electricity	(3)	(3)	(4)	(5)	(6)	(6)
Depreciation	(3)	(3)	(3)	(3)	(3)	(3)
Other overheads	(2)	(2)	(2)	(2)	(2)	(2)
Â	Â	Â	Â	Â	Â	Â
Total expenses	(50)	(51)	(54)	(52)	(51)	(50)
Profit for the month	7	8	8	5	2	1

It plans to increase inventories from the 30 June level by £1,000 each month until, and including, September. During the following three months, inventories levels will be decreased by £1,000 each month. Inventories purchases, which had been made on one month’s credit until the June payment, will, starting with the purchases made in June, be made on two months’ credit. Salaries, wages and ‘other overheads’ will continue to be paid in the month concerned. Electricity is paid quarterly in arrears in September and December. At the end of December, the business intends to pay off part of some borrowings. This payment is to be such that it will leave the business with a cash balance of £5,000

with which to start next year. Prepare the cash budget for the six months ending in December. (Remember that any information you need that relates to the first six months of the year, including the cash balance that is expected to be brought forward on 1 July, is given in Example 6.1.