- Financial Accounting Essay Example | Topics and Well Written Essays - 1500 words

- Financial Accounting - Essay Example See appendix 2 (Clarke 2010, pp. 71). (b): while preparing the cash budget, the sales increase by  £ 3,000 per month has been factored in. On a similar note, the quarterly payment of electricity cost and the reduction of the electricity by  £ 1,000 every month have been factored in. See appendix 3 (Albrecht 2007, pp. 901). (c): Working capital includes cash, inventory, marketable securities and account receivables. It is always advisable for business entities maintain a sufficient amount of cash, since it is the most liquid asset, to enable an entity’s operations to run effectively. Therefore, cash, account receivables and marketable securities are types of working capital that are constantly required to carry out the operations of a business entity. Kawasaki Ltd has two types of working capital under its management. They are the account receivables, the inventories and cash. Though the inventories are not as liquid as compared to cash, they can be converted to cash when the need arises (Bhattacharyya 2004, pp. 29-50). The company has a policy in place to regulate the account receivables. The policy states that the buyers have 30 days after sales to pay their dues. Therefore, the debtors’ payable period is 30 days. The period is short enough to reduce the amount of cash tied up on debts, thus, increases the cash availability for the company. In addition, the policy improves the revenue generated by the company, thus, improves the net income. Second, the company has formulated a policy that would see the inventory levels reduced during the low-demand season. The policy will see the inventory wastage eliminated; thus, eliminate the cost related to such wastage, thus. Improve the revenue. Third, based on the cash budget for Kawasaki Ltd, the cash balance increases every month. From the cash budgets, the cash availability in the company is sufficient enough to support the company’s operations. The cash levels should be