Cash planning, Managerial Accounting

Assignment Help:

Firms need cash to invest in inventory, receivables and fixed assets and to create payments for operating expenses, so as to increase earnings and sales and make sure the smooth running of business.

In the absence of appropriate planning the firm may face two types of conditions:

i)  Cash deficit, and

ii) Cash Surplus.

In the former condition the usual working of the firm may be hampered and in excessive cases this kind of situation may cause liquidation of the firm. In the last case the firm having surplus cash might be losing out on chances of earning good returns, like the cash is remaining as idle. So as to ignore these types of conditions the firms must resort to cash planning. Cash planning is a method to control and plan the use of cash. This involves anticipating future cash flows and cash requirements of the firm. The major goal of cash planning is to decrease the possibility of idle cash that lowers the firm's profitability and also cash deficits that can cause the firms failure. Cash planning includes developing a projected cash statement from a forecast of cash outflows and inflows for a specified period. Such forecasts are depends on anticipated present or future operations. The frequency of cash planning would base on the nature and complexity of the firms operations. Generally large firms prepare weekly and daily forecasts while medium and small firms prepare per month forecasts.


Related Discussions:- Cash planning

Steps of choosing an accounting based performance, Steps of choosing an acc...

Steps of choosing an accounting based performance measure Consider the overall goal of the organization as a whole. It is important to choose a measure of accomplishment that r

Motives for conducting cash balances, In this section we have discussed the...

In this section we have discussed the motives for conducting cash balances. In addition, we have discussed cash deficit or surplus situation and how it can be contained by the use

How the tax credit will affect price and quantity , 1. In order to boost th...

1. In order to boost the housing market throughout 2009 and into 2010, the federal government offered a tax credit to first-time home buyers and some repeat buyers.

Incremental budgeting , Incremental budgeting This is used to describe...

Incremental budgeting This is used to describe an incremental cost approach to budgeting where the next period budget is based on the current year’s results plus an extra amou

Case study, Your company provides you with a car. You are told only to driv...

Your company provides you with a car. You are told only to drive in Dade and Broward and only to use the car for business purposes. One weekend your family is going to the Keys. Yo

Industrial Grinders, accepted#Regarding the Overhead costs, these are alloc...

accepted#Regarding the Overhead costs, these are allocated based on Direct Labor;

Operating cycle concepts, Operating cycle considers to the average time lap...

Operating cycle considers to the average time lapse among the acquisition of raw material and the final cash realization. This notion is used to determine the needs of cash working

Length of operating or working capital cycle, Change of Technology: Change...

Change of Technology: Changes in technology commonly leads to improvements in the efficient processing of raw material, reduce in wastages, more speedy production and higher produ

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd