What is the Cash Budget? Meaning and Definition

What Do You Mean Cash Budget? A cash budget is a budget or plan of expected cash receipts and disbursements during the period. The cash budget is a written estimate of a firm’s future cash position. It predicts for some future period the cash receipts from different sources, cash disbursements for different purposes and the resulting cash position generally on a monthly basis as the budget period develops. Cash budget consists of all expected inflows of cash including income and non-income sources such as receipts from the sale of stocks and bonds and receipts from the sale of fixed assets. It is, thus, a formal presentation of-expected circular flow of cash through the business. So, what is the question; What is the Cash Budget? Meaning and Definition.

Here are explain What is the Cash Budget? with Meaning and Definition.

What is the meaning of Cash Budget? A cash budget is an estimated projection of the company’s cash position in the future. The cash budget depicts the movement of cash whereas the projected income statement presents account for all sources of income to be tapped and for all classes of expenses to be incurred during a stated period and show how much profit, if any, is expected to be earned in a future period.

Definition of Cash Budget:

A formal presentation of-expected circular flow of cash through the business. Likewise, cash budget provides for all types of cash outgo including payments of expenses accrued in the prior periods, the forecast period, or the subsequent periods (pre-payments) or as payments not immediately related to expenses such as the purchase of fixed assets or dividend distribution to the stockholders. Disbursements in respect of the purchase of fixed assets or dividend distribution would not find the place in the income statement. Similarly, there are certain items that would appear in the income statement but are not included in the cash budget.

A cash budget is defined as:

“Cash budget shows in detail budgeted cash receipts and payments of both capital and revenue nature. In addition, a cash budget also determines the expected cash balance of the organization business at specific intervals.”

The usual forecast period of a cash budget is one year broken down by monthly periods or weekly periods. This allows incorporation of seasonal variations in cash flow. When cash flows are relatively stable, the finance manager may prepare a budget for full one year period. When the outlook is very uncertain, he may have to be satisfied with a projection for only quarterly.