A company is preparing its cash budget. Its cash balance on January 1 is $290,000 and it has a minimum cash requirement of $340,000. The following data has been provided: January February March Cash receipts $1,061,200 $1,182,400 $1,091,700 Cash payments 984,500 1,210,000 1,075,000 What is the amount of the deficiency or excess cash (after considering the minimum cash balance required) for January

$26,700 excess

Explanation:

The amount of deficiency or excess can be determined only when the ending cash balance is known. The ending cash balance is the addition of the net movement in cash to the opening cash balance.

The net movement is the difference between the total receipts and the total payments or disbursement.

Total receipts for January

= $1,061,200

Total payments

= $984,500

Net movement = $1,061,200   - $984,500  

= $76,700

Ending balance = $290,000 + $76,700

= $366,700

If the minimum cash requirement is $340,000

The amount of the (deficiency)/excess cash (after considering the minimum cash balance required) for January

= $366,700  - $340,000

= $26,700