Prepare a trade-payables budget
Forecast supplier payments from purchases, opening payables and the agreed settlement pattern.
Section 4.3 · Budgeting and budgetary control
Cambridge International AS & A Level Accounting 9706, 2026–2028 syllabus, Version 2. Topic 4.3 covers budgetary control, linked master-budget schedules, spreadsheets, limiting factors, flexible budgets, reconciliations, behavioural effects and supported decisions. Practice is self-checked, not an official Cambridge grade. Full timed Papers 1–4 and human subject-teacher review remain outstanding.
Before you begin
- Use AS Topics 2.1–2.2 for cost behaviour, contribution and budgeting foundations. For each schedule, label the period, units, price, inventory policy, timing assumptions and opening balance before calculating.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
If a supplier invoice is not yet paid, where is it generally represented?
What you will learn
- Apply supplier payment timing
- Calculate period cash paid to suppliers
- Reconcile closing trade payables
Purchases can be paid in a later period
A trade-payables budget forecasts payments to credit suppliers. Apply each month's payment percentage to that month's credit purchases, and include amounts due from opening payables when they are expected to be paid.
Cash purchases are paid in the period of purchase under the stated assumption. Keep purchases separate from payments so that credit terms flow correctly into the cash budget.
Track the outstanding balance
Closing trade payables = opening trade payables + credit purchases − payments made to suppliers, adjusted for returns or other items when provided.
Late payment may preserve cash in the short term but can lose discounts, damage supplier trust or interrupt supply. A forecast should support reliable payment and production, not simply delay every invoice.
Pause and explain
Opening payables $8,000; purchases $25,000; payments $22,000. Find closing payables.
Worked example
Credit purchases are $30,000 monthly. Pay 70% in the month of purchase and 30% next month. Opening payables of $7,000 are paid this month. Find current payments.
Show the worked solution
- Current-month share = 70% × $30,000 = $21,000.
- Prior-month share = 30% × $30,000 = $9,000.
- Add $7,000 opening payables: total $37,000.
Answer Payments to suppliers are $37,000 under the stated assumptions.
Try a topic test
Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
Credit purchases are $16,000; pay 75% now and 25% next month. Opening payables of $3,500 are paid now. Find current payments.
Give me a hint
Add the current share of purchases and the opening balance due.
Compare my reasoning
- Current share = 75% × $16,000 = $12,000.
- Add opening payables of $3,500.
- Payments = $15,500.
$15,500 payments this month.
Look for these in your work
- Current payment share correct
- Opening balance included
- Total correct
Opening payables are $12,000. Credit purchases are $40,000; 60% is paid now and $9,000 is paid from earlier invoices. Find closing payables.
Give me a hint
Only the payment amount, not the purchase amount, reduces the payable balance.
Compare my reasoning
- Current purchases paid = 60% × $40,000 = $24,000.
- Total payments = $24,000 + $9,000 = $33,000.
- Closing payables = 12,000 + 40,000 − 33,000 = $19,000.
Closing trade payables are $19,000.
Look for these in your work
- Purchase payment share correct
- Earlier invoices included
- Closing balance reconciled
A supplier offers a 2% discount for payment within ten days, but paying early may create a cash shortage. What should the business compare?
Give me a hint
Value the discount against financing, liquidity and supplier continuity.
Compare my reasoning
- Calculate the discount saving on eligible invoices.
- Compare early payment with available cash and the cost of short-term finance.
- Check whether early payment would prevent essential wages, taxes or inventory purchases.
Compare the discount with financing cost and liquidity risk; do not accept a saving that causes an unaffordable cash shortfall.
Look for these in your work
- Discount quantified
- Cash and financing checked
- Essential payments protected
Common mistakes
- Putting purchases into cash payments in the same month without applying terms
- Forgetting opening payables
- Subtracting payments from purchases instead of from the payable balance
What can you explain now?
How do you calculate closing trade payables?
Compare with the explanation
Opening payables + credit purchases − payments
Purchases increase the amount owed; payments reduce it.
After trying it yourself, choose your next review. This is your self-assessment.
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Make it stick
Why is the trade-payables budget different from the purchases budget?
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.