[hateaccounting]

How do you prepare a schedule of expected cash collections

[rehmanvohra]

There are a number of different sources for collection of cash and I think you are perhaps stuck with collection from customers against cash and credit sales.

Cash sales are simple - just take the figure of cash sale for each month.

Credit sales are a problem. The question will give you possible collections from credit customers such as 40% in the month of sale, 50% in the month following the sale and 5% in the second month after sale and the balance is not recoverable.

In such cases you have to breakdown each months credit sales according to collection and use these figures in your cash budget.

There will be an account receivable or a sales figure for previous two months. Apply those figures for recording collections.

Assuming you are preparing a cash budget from January, there will be receivables for November and December sales. Both these receivables will be after allowing for possible bad debts. November sales collections will be taken as is but December collections will consist of 50% + 5%. Divide the rfeceivable amount by 55% and calculate January and February collections at 50% and 5%