The correct answer is: B. All inflows would arise before outflows for those periods.
A cash budget is a financial statement that projects future cash inflows and outflows. It is used to help businesses plan for their cash needs and to avoid running out of cash.
The cash budget is prepared by estimating the cash inflows and outflows for each period in the future. The cash inflows are typically from sales, collections of receivables, and other sources of income. The cash outflows are typically for expenses, payments to suppliers, and other uses of cash.
The cash budget is a valuable tool for businesses of all sizes. It can help businesses to:
- Plan for their cash needs
- Avoid running out of cash
- Make sound financial decisions
The cash budget is a dynamic document that should be updated regularly to reflect changes in the business’s operations and financial condition.
Here is a brief explanation of each option:
- Option A: The shortage or excess of cash would appear in a particular period. This is true. The cash budget shows the projected cash balance for each period. The shortage or excess of cash is the difference between the cash inflows and outflows for that period.
- Option B: All inflows would arise before outflows for those periods. This is not true. The cash budget shows the projected cash inflows and outflows for each period. The inflows and outflows may not occur in the same period. For example, a business may receive a payment from a customer in one period and make a payment to a supplier in the next period.
- Option C: Only revenue nature cash flows are shown. This is not true. The cash budget shows all cash inflows and outflows, regardless of whether they are revenue or expense items. For example, the cash budget would show the cash receipts from sales and the cash payments for expenses.
- Option D: Proceeds from issue of share capital is shown as an inflow. This is true. The cash budget shows all cash inflows, including the proceeds from the issue of share capital.