Question 1

A subscription box service is preparing its cash budget for March. 
Sales are budgeted as follows:
- January: $100,000
- February: $120,000
- March: $150,000

Customers pay as follows:
- 20% in the month of sale (cash sales)
- 50% in the month following sale
- 28% in the second month following sale
- 2% are bad debts (never collected)

Calculate the total cash receipts budgeted for March. (Enter number only, no commas or symbols)

Accepted Answer

Calculate March cash sales (20% of March). Add February collections (50% of Feb). Add January collections (28% of Jan). Ignore bad debts.

Question 2

What mistakes do candidates make on this ACCA question?

Accepted Answer

Applying the percentages to the wrong months, or trying to deduct bad debts from the cash collected (bad debts are already excluded from the 20+50+28 = 98% collection profile).

How to approach this question

Full Answer

Common mistakes

Practice the full ACCA MA — Management Accounting Practice Exam 1

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