Teaching Cost Accounting: A Focus on Bad Debts and Purchases Discounts in the Cash Budget

This paper presents materials that have been used in the classroom to teach cash budgeting procedures and which, based on exam results, have helped students better understand the workings of a cash budget. An overview of the... [ view full abstract ]

This paper presents materials that have been used in the classroom to teach cash budgeting procedures and which, based on exam results, have helped students better understand the workings of a cash budget. An overview of the cash budget is first presented, followed by problems involving projected cash collections and budgeted accounts receivable, first without and then with bad debts. A focus on budgeted cash payments (and accounts payable balances) is next presented, first without and then with purchases discounts. These areas capture the key determinants in the cash flow of a business and are crucial in forecasting and then maintaining adequate liquidity for effective business operations.