Grade 11 Accounting Term 3 | Cash budget |Creditors Payments Schedule

Summary

This video tutorial guides viewers through the process of preparing a creditors' payment schedule, using a case study of 'Fantasy Laptop' business. It covers the calculation of credit purchases based on sales, taking into account the markup percentage, and demonstrates how to apply different payment schedules with discounts. The video also touches on related calculations for a cash budget, including percentage increases in security costs and commission rates, as well as water and electricity budgeting and loan repayments. Aimed at educating viewers on financial management, it encourages practice and offers additional study materials for further learning.

Takeaways

• 📚 The video is a tutorial on preparing a creditors payment schedule, which is a data collection schedule for creditors.
• 📋 The tutorial is based on a question paper that involves a business scenario with a budgeted period from December to January.
• 💻 The business in question, Fantasy Laptop, sells laptops and provides repair services, but does not sell on credit.
• 🔢 The markup percentage used to set the sales price of laptops is 75%, and historical sales data from October to February is provided.
• 🛒 All stock is bought on credit, meaning 100% of purchases are made with creditors.
• 💼 The first step in calculating the creditors payment schedule is to determine the cost of sales, which is the same as total credit purchases.
• 💰 Creditors offer a 10% discount for payments made in the month of purchase, and the payment schedule is divided into 50% in the month of purchase, 30% the following month, and 20% two months after purchase.
• 📉 The tutorial includes calculations for the months of December, January, and February, showing how to apply the payment schedule to determine the amounts due.
• 📈 Additional calculations are made for percentage increases in security costs and commission paid to salespersons, using the formula (new - old) / old * 100.
• 💡 The video encourages viewers to subscribe for more educational content and mentions the availability of study guides and online classes for further learning.
• 🎓 The presenter emphasizes the importance of practice and preparation for tests and examinations, suggesting that the content provided can help viewers succeed in their academic pursuits.

Q & A

What is the main topic of the video?

The main topic of the video is to prepare a creditors payment schedule for a business named Fantasy Laptop.

What is the business model of Fantasy Laptop according to the script?

Fantasy Laptop sells various types of laptop computers and does not sell on credit. They also repair items for customers at a fee.

What is the markup percentage used by Fantasy Laptop to set the sales price of the laptops?

Fantasy Laptop uses a markup of 75% on cost to set the sales price of the laptops.

What is the significance of calculating credit purchases in the context of the video?

Calculating credit purchases is important because it helps determine the cost of sales, which is essential for preparing the creditors payment schedule.

How does the script suggest calculating the cost of sales from the sales amount?

The script suggests dividing the sales amount by 1 plus the markup percentage (175% in this case) to calculate the cost of sales.

What is the payment schedule for creditors as described in the video?

The payment schedule involves 50% payment in the month of purchase, 30% in the following month, and 20% two months after the purchase, with a 10% discount if paid within the purchase month.

What is the purpose of the discount offered by some creditors in the video?

The discount is offered as an incentive for prompt payment within the month of purchase.

How does the script explain the process of replacing stock sold?

The script explains that all stock sold is replaced in the months of sales, meaning that any stock purchased and sold is immediately replaced.

What are the additional calculations mentioned in the video related to the cash budget?

The additional calculations include the percentage increase in insecurity cost from February and the percentage commission paid to the salesperson during February.

How is the percentage increase calculated in the video?

The percentage increase is calculated by taking the difference between the new and old amounts, dividing by the old amount, and then multiplying by 100.

What is the expected increase in water and electricity costs mentioned in the video?

The expected increase in water and electricity costs from January 2021 is 24%.

How does the video describe the loan repayment process?

The video describes a fixed loan repayment process where the interest on the loan decreases due to repayments, and the capital amount can be calculated using the interest rate.

Outlines

00:00

📋 Preparing a Creditors Payment Schedule

The video script introduces the task of preparing a creditors payment schedule, which is likened to a data collection schedule. The presenter encourages viewers to watch the entire video to learn about the nuances of this financial tool. The example provided involves 'Fantasy Laptop,' a business that sells laptops and offers repair services, but does not sell on credit. The script outlines the process of calculating credit purchases based on sales figures and a 75% markup on cost. It also explains how to account for discounts offered by creditors for prompt payments and how stock is managed, with all purchases being made on credit and replaced immediately after sale.

05:00

🔢 Calculating Payment Schedules and Discounts

This paragraph delves into the specifics of calculating the payment schedule, including the application of discounts for prompt payments. The script explains how to calculate the payment for the same month, the following month, and two months after the sale, with percentages of 50%, 30%, and 20% respectively. It provides numerical examples for December, January, and February, showing how to apply these percentages to the credit purchases to determine the payments due. The importance of showing these calculations for marking purposes is highlighted.

10:01

📈 Analyzing Financial Changes and Commissions

The script shifts focus to analyzing financial changes, such as the increase in security costs and the decrease in sales commissions. It provides a formula for calculating percentage increases or decreases, emphasizing its reliability. The presenter demonstrates how to apply this formula to security costs, which have risen from 18,000 to 28,000, resulting in a 58.3% increase. Similarly, the commission paid to salespersons has decreased by 23%. The script also touches on the expected increase in water and electricity costs and how to calculate it based on a 24% rise from January 2021.

15:02

💼 Loan Repayment Calculations and Future Engagement

The final paragraph discusses loan repayments, explaining that the interest on the loan does not get capitalized and that fixed repayments are made. The presenter guides through the calculation of the loan repayment amount based on the decrease in interest from one month to the next. A specific example is given, showing how to determine the capital amount repaid. The script concludes with an invitation for viewers to subscribe to the channel for more educational content and an encouragement to join extra classes for further training.

Keywords

💡Creditors Payment Schedule

A 'Creditors Payment Schedule' is a financial document that outlines the payments due to suppliers over a specific period. In the video's context, it is used to organize and plan for the payments that the business 'Fantasy Laptop' needs to make to its suppliers for goods purchased on credit. The script explains how to calculate the credit purchases and then how to apply different payment terms and discounts to these purchases.

💡Markup Percentage

The 'Markup Percentage' refers to the percentage by which the cost of a product is increased to determine its selling price. In the video, a markup of 75% on cost is used to set the sales price of the laptops, which is a key factor in calculating the cost of sales and, subsequently, the credit purchases.

💡Cost of Sales

'Cost of Sales' or 'Cost of Goods Sold' (COGS) is the direct cost attributable to the production of the goods sold by a company. In the video, the cost of sales is calculated by applying the markup percentage to the sales figures, which helps in determining the credit purchases made by the business.

💡Credit Purchase

A 'Credit Purchase' is when goods are bought from a supplier with the promise to pay at a later date. The script discusses calculating credit purchases based on the cost of sales, which is essential for preparing the creditors payment schedule.

💡Discount for Early Payment

The script mentions that some creditors offer a 'Discount for Early Payment', which is an incentive for businesses to pay their debts sooner. In the video, a 10% discount is given if the payment is made within the month of purchase, which is factored into the creditors payment schedule calculations.

💡Cash Budget

A 'Cash Budget' is a detailed plan that presents expected cash inflows and outflows over a certain period. The video touches on how certain calculations, such as the loan repayment and the expected increase in security costs, are recorded under a cash budget.

💡Security Cost

'Security Cost' in the video refers to the expenses related to the protection of the business's assets. The script discusses calculating the percentage increase in security costs from one month to the next, indicating a rise in expenditure in this area.

💡Commission

In the context of the video, 'Commission' is the payment made to sales personnel based on their sales performance. The script includes a calculation of the percentage change in commission paid to a salesperson during a specific month, reflecting a decrease in their earnings.

💡Loan Repayment

A 'Loan Repayment' is the process of paying back the principal and interest on a borrowed sum of money. The video explains how to calculate the fixed loan repayment amount, given the interest rate and the reduction in interest due to repayments.

💡Percentage Increase

The 'Percentage Increase' is a measure of how much a value has increased over time, expressed as a percentage of the original value. The script uses this concept to calculate the increase in security costs and water and electricity expenses, showing a rise in these business costs.

💡Water and Electricity

In the video, 'Water and Electricity' refer to the operational expenses related to the utility costs of the business. The script discusses an expected increase in these costs, which is an important consideration for budgeting and cash flow management.

Highlights

Introduction to preparing a creditors payment schedule for a business scenario.

Explanation of the difference between a creditors payment schedule and a data collection schedule.

The importance of understanding the provided question paper for the creditors payment schedule.

Business scenario setup: Fantasy Laptop, a business owned by R, selling laptops and providing repair services.

Business operates without selling on credit, which simplifies the creditors payment schedule.

Use of a 75% markup on cost to set the sales price of laptops.

Calculation of credit purchases based on sales amount and markup percentage.

All stock is bought on credit, affecting the calculation of credit purchases.

Demonstration of calculating credit purchases for December, January, and February.

Explanation of payment terms: 50% payment in the month of purchase with a 10% discount.

How to calculate the creditors payment schedule for each month based on the payment terms.

Calculation of payments for December, January, and February with discounts and payment terms.

Stock sold is replaced in the month of sales, affecting the creditors payment schedule.

The impact of payment terms on the distribution of payments over several months.

Calculation of percentage increase in security cost from previous months.

Explanation of how to calculate the percentage change in commission paid to salespersons.

Expected increase in water and electricity costs and how to calculate it.

Details on loan repayment, including interest rates and fixed repayment amounts.

Final thoughts on the importance of understanding the creditors payment schedule for business management.

Transcripts

guys so into this video we are going to

prepare creditors payment schedule so

crator payment schedule guys H is more

like a data collection schedule the one

we were doing on the previous video but

in today's video I come with the

question paper that is going to deonate

with the creditors payment schedule so

please make sure that you stay tuned

watch until the end so that you're going

to learn something that you didn't know

know about the Creator payment schedule

okay let's read the question you are

provided with the information of fantasy

laptop a business owned by R for the

budgeted period December to

january2 okay and the business sell

various type of laptop computers and

does not sell on credit and they also

repair this item for customers at fee

okay H required 4.1

refer to information A and B number one

complete the cror payment schedule

that's our main question and we also

going to touch 4.2 which is related to

calculation that are going to be

recorded under a cash budget okay let's

go to information number A and

B markup percentage and sales a markup

of 75% on cost is used to set the sales

price of the laptop okay and they give

us H sales from October up to H February

all right so we were already provided

with an answer sheet uh that look like

this okay now let's

calculate they said that we need to

calculate for

only

uh

February this month but we can calculate

this one as well so that you will be

learning how to calculate this schedule

okay the first step the first step when

you calculate a crus payment you must

calculate a credit purchase like when

you prepare data collection schedule you

first calculate credit sales here we

deal with credit purchase because

creditors payment we are paying to our

supplier which means that we must use

credit purchase so in this case we are

given a sales amount but we have a

markup that we can convert it to cost of

sales cost of sales is the same as total

purchase and you don't just put it as

total purchase here we are looking for

only credit purchase okay let's read

number B all stock is bought on credit

which means that all stock are on credit

which means that 100% of it is on credit

now let's

calculate because we have a markup we

can calculate our credit purchase

because they said all of them is um

credit which means that no need for us

to go and calculate again the percentage

of credit purchase because all of them

they said are on credit okay for

December we're going to have

770,000

M by because we are looking for cost of

sales 100 must be on top and we divide

by 175 because our markup is 75

okay

January H we're going to have

560 M by 100 over 175 and for February

is

520

5,000 100 over

175 okay let's first get answers

here uh for December it's going to be

440 ,000 and January is going to be

320,000 and for February it's going to

be

330,000

that's our

answers okay you need to make sure that

you show this calculation so that you

can in marks okay now let's check how

this payment schedule are made they said

number B some creditors offer discount

for payment in the the months of

purchase okay 50% okay let's read the

one that I skip stock sold is replaced

in the months of sales simple means that

all stock that they purchase if we sold

them we replace them immediately okay

then they give us the schedule 50% is

paid in the month of purchase in the

same month if we purchase December 50%

will be paid in December and 30%

after H month of sales the following

month

20% is settled the second month after

the second month or the following month

of sales okay we have a 10% discount

where there's a 50% so guys when you

start this schedule the first step if

you want to simplify it because they

said the same month is 50% you must look

at the same month here when we said the

same month you must point December and

this side you must also point December

January and January and you check they

going to meet here February and February

they're going to meet here just like

that which means that these

three they are going to be

50% okay let's calculate it's going to

be

440,000

M

50% M by

90% why 90 because we have 10% %c

discount 100us 10 it give us 9 we get

answer

jary it's me here

320 M by

100 okay apology M by

50% M by

90% it's going to give us answer and we

go to February we do the same 330,000

M by 50%

by

90% it's going to give us answer okay uh

if you calculate for February it's going

to give you

135,000 and for

January it's going to give you

144,000 and for

December is going to give you

198,000 just like that all right now

moving to the next one remember they say

that

50% same

month then they say

that

uh

30% is follow following

months then 20% is after following

months okay 50% we did it which for

example was December and December now

when we go to 30% following month if we

are on December following month is

January if you were on December

following month is January if you were

on January following month is February

if you were on February following month

is March just like that okay December

January is going to be following month

and we say

440 mly by 30%

and we get

answer January following month is

February we're going to see

320

by

%. okay and it's going to give

us0 30% is going to give us

96,000

okay and this one is going to give us

132

th000 just like that now we are going to

20% 20% is months after the following

month if we talking about December

following month is January and after

following month is February 20% is going

to apply here we are going to say

440 mly by

20% and it's going to give us

88,000 that's how

we deal with creditors payment schedule

this month is the previous one

January December is the previous month

that's why you see there's no anything

February December is the old month

because already February we on the

following year J February and January

January is the previous month that's why

we have nothing here so that's how H we

compile H collection schedule guys very

simple very simple and straightforward

so please guys for those who want to buy

a stud guide a soft copy is still

available grade 11 and gr 12 and grade

10 make sure that you purchase as soon

as possible so that you can get question

like this one so that you will be able

to practice more and more example and

train yourself so we are going to do 4.2

which we are going to do some

calculation and also guys those who want

to join extra class online they still

available only 100 you attend twice a

week and we also provide a lot of

examples so that you can train yourself

before you write a test make sure that

you join as as early as possible so that

you won't face any challenge when you

write U your test guys under R is

nothing compared to your future so make

sure that you join andand per month

communicate with your parents so that

they can help you to pay okay 4.2

calculate the following refer

information C and D calculate

increase percentage increase

in insecurity cost from February and

number two percentage commission paid to

sales person during

February

okay let's start by expected insecurity

Cod

from February if we

check uh security cost it has increased

from 18,000 to 28,000 now we want to

calculate increase when we calculate the

percentage increase guys use this

formula

new minus

old divide by old M by 100 this formula

will never give you a wrong answer

always correct

okay a new amount of security was

28,000 500 the old one

minus uh

18,000 and we divide by 8

18,000 and we multiply by

100 okay and it's going to give you

58 it's going to give you

58

3% okay and the next

one they want us to calculate

for okay let me check commission paid to

sales percent percentage change to

commission okay if you take commission

guys uh

okay they said which month

December okay commission for December it

uh came

from

123 going down to

89,00 which means that our new is

89 600 obviously it's going to give you

a decrease a negative minus

123 200 divide by 123 200

by 100 it's going to give

you

uh

sixa

3% of

decrease all right H you need to

recalculate this to be 100 100 100% CH

but the the formula is still very

correct because I'm using a cell phone

to do calculation okay and also guys

make sure that you first calculate this

and get answer then you divide so that

because some calcul T they will give you

different figures okay otherwise let's

go to water and electricity budgeted for

December okay let's take water and

electricity transation they said

expected increase from January 2021 is

24%

there's an expected increase from

January which is

24% uh let's check water and

electricity for December we don't have

any amount we are looking for it and

jary is

18,000 Janu is

18,

600 and we want to go back when we want

to go back we are looking for 100% and

what we have is after increase of 124

100 + 24 and it's going to give you an

answer okay I'm going to calculate this

after the loan okay now let's go to

loan the loan amount they say

that

um let me check let me check question

again the loan repayment to be made on

December we are looking for loan

repayment okay a loan repayment they

said the loan from Delta Bank bear

interest of 12.5% per year and interest

is NOT capitalized and fixed loan

repayment is made a fixed loan it does

not change in other words okay if you

check we have only one option to

calculate this repayment we have a

interest on

loan December it was 9,000 and January

it was 8,000 the interest decreased

because of what of repayment the first

step we must calculate the

different

9,375 minus

8,125 is going to give us the different

of that

H loan uh this this interest let's

calculate

9375 -

8125 the interest gave us

12550 and now we are looking for this

Capital amount we must say 100

divide by 12a 5 of Interest then it's

going to give

us 10,000 the loan repayment that was

made it was 10,000 and this one let me

calculate

8,600 M by 100 over

124 then is 15,000 this

side this is water and electricity

C this one is loan

repayment I hope you learn something

guys and you enjoy please if you haven't

subscribed to this channel make sure

that you do so so that by the end of

this month or by the end of this year

guys we must be able to reach at least

20,000 H subscribers we're going to keep

uploading more and more more videos so

that you will prepare yourself to write

test and examination see you on the next

one