Prepare a trade-receivables budget
Forecast customer receipts from cash sales, credit sales and the stated collection 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 25% of credit sales are collected next month, what happens to the remaining 75%?
What you will learn
- Separate credit sales from cash sales
- Apply collection timing across periods
- Calculate closing trade receivables
Sales and receipts occur at different times
A trade-receivables budget forecasts cash collected from credit customers. Apply the stated collection pattern to the credit sales of each period, and include opening receivables that are expected to be collected.
Cash sales are received at the time of sale under the stated assumption; they are not added to trade receivables. Make a period table so that each month's sales are collected in the correct later month.
Reconcile the closing balance
Closing trade receivables = opening receivables + credit sales − cash collected from credit customers − irrecoverable balances or other adjustments, if supplied.
Late payments, discounts, defaults and changed terms can alter cash receipts. Use the question's exact timing assumptions and evaluate credit control and customer relationships before tightening terms.
Pause and explain
Credit sales are $10,000 and 70% are collected immediately. How much remains uncollected before later receipts?
Worked example
Credit sales are $20,000 each month. Customers pay 60% in the month of sale and 40% in the next month. Opening receivables of $5,000 are collected this month. Find this month's receipts.
Show the worked solution
- Current-month collections = 60% × $20,000 = $12,000.
- Collect 40% of last month's $20,000 credit sales = $8,000.
- Add the $5,000 opening balance collection: total $25,000.
Answer Cash receipts are $25,000, assuming all opening receivables are collected as stated.
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.
Sales are $12,000 cash and $18,000 credit. Half of credit sales is collected this month and half next month. Opening receivables of $4,000 are collected now. Find this month's receipts.
Give me a hint
Cash sales arrive now; include only the current collection share of credit sales and opening receipts.
Compare my reasoning
- Cash sales receipts = $12,000.
- Current credit receipts = 50% × $18,000 = $9,000.
- Add opening receipts $4,000: total $25,000.
$25,000 cash receipts this month.
Look for these in your work
- Cash sales included
- Credit timing applied
- Opening receipts included
Opening receivables are $6,000; credit sales are $24,000; 75% of current credit sales are collected now; $1,000 is written off. Calculate closing receivables.
Give me a hint
Use opening balance plus credit sales less collections and write-offs.
Compare my reasoning
- Collections = 75% × $24,000 = $18,000.
- Closing receivables = 6,000 + 24,000 − 18,000 − 1,000.
- Closing balance = $11,000.
Closing trade receivables are $11,000.
Look for these in your work
- Collections calculated
- Write-off deducted
- Closing balance correct
A business extends credit terms to increase sales. Which budgets should be reviewed before deciding?
Give me a hint
Consider revenue and profit alongside collection timing and bad-debt risk.
Compare my reasoning
- Update the sales budget for expected quantity and price effects.
- Update receivables and cash schedules to reflect slower collection.
- Assess finance cost, default risk and customer retention before approving the terms.
Review sales, receivables and cash together, including financing and default risk. More credit sales do not mean more immediate cash.
Look for these in your work
- Sales assumption reviewed
- Cash timing reviewed
- Risk and customer effect considered
Common mistakes
- Counting credit sales as cash received immediately
- Applying the collection percentage to cash sales
- Forgetting opening receivables or the prior period
What can you explain now?
Which sales belong in trade receivables?
Compare with the explanation
Credit sales not yet collected
Trade receivables arise from credit sales until the customer pays.
After trying it yourself, choose your next review. This is your self-assessment.
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Make it stick
State the closing trade-receivables relationship and explain why credit sales are not immediate cash.
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.