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

Calculate the direct materials costs, XYZ Industries manufactures electroni...

XYZ Industries manufactures electronic testing equipment. XYZ also installs the equipment at customers' sites and ensures that it functions smoothly. Additional information on the

Limitations of abc analysis, LIMITATIONS OF ABC ANALYSIS However ABC an...

LIMITATIONS OF ABC ANALYSIS However ABC analysis is a basic tool for exercising selective control over many inventory items, it does not, in its current form, allow precise con

Accounting concepts, implications of applying accounting concepts wrongly

implications of applying accounting concepts wrongly

Line of credit, It is a commitment by a bank to lend a specific amount of f...

It is a commitment by a bank to lend a specific amount of funds on demand identifies the maximum amount of unsecured credit the bank will allow the customer to borrow at any time.

Break even assumptions, underlying assumptions of breakeven analysis and th...

underlying assumptions of breakeven analysis and the limitations of this.

Standerd costing, Ask queThe standard cost of chemical mixture ~ PQ’ is as ...

Ask queThe standard cost of chemical mixture ~ PQ’ is as follows: 40% of material P @ Rs. 400 per kg. 60% of material Q @ Rs. 600 per kg. A standard loss of 10% is normally anticip

How can we draw a break even chart, How can we draw a break even chart ...

How can we draw a break even chart Under this method the variable cost line is drawn first and then fixed cost line is drawn over and parallel to the variable cost line. The fi

Management accounting, Management Accounting An accounting discipline c...

Management Accounting An accounting discipline concerned with the use of financial information. It used to relevant information by managers and other decision makers inside a s

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