• Cash receipts – money coming in (cash inflows), such as cash sales, money received from debtors, or capital introduced.
• Cash payments – money going out (cash outflows), such as cash purchases, payments to creditors, wages, rent, and other expenses.
• Opening cash balance – the amount of cash at the beginning of the period.
• Closing cash balance – the amount of cash expected at the end of the period.

$\text{Closing cash balance} = \text{Opening cash balance} + \text{Total cash receipts} - \text{Total cash payments}$

A cash budget is usually prepared monthly and has the following structure:

Mwanajuma runs a small shop in Morogoro. She expects to have TSh 500,000 as cash in hand on 1st April 2025. During April 2025, she expects the following:

Cash receipts:

• Cash sales: TSh 1,200,000
• Receipts from debtors: TSh 300,000

Cash payments:

• Cash purchases: TSh 800,000
• Payments to creditors: TSh 200,000
• Wages: TSh 150,000
• Rent: TSh 100,000
• Transport: TSh 50,000

Prepare Mwanajuma's cash budget for April 2025.

Solution

Explanation: Mwanajuma starts with TSh 500,000. She receives TSh 1,500,000 (1,200,000 + 300,000), making TSh 2,000,000 available. She pays out TSh 1,300,000 in total. Therefore, her closing cash balance is:

$500,000 + 1,500,000 - 1,300,000 = 700,000$

This means at the end of April 2025, Mwanajuma should have TSh 700,000 in cash.

1. Determine the opening cash balance at the beginning of the period.
2. List all expected cash receipts and add them together.
3. Add the total receipts to the opening balance to get total cash available.
4. List all expected cash payments and add them together.
5. Subtract total payments from total cash available.
6. The result is the closing cash balance, which becomes the opening balance for the next period.

A Form 2 student in Tanzania can use cash budgeting to manage a small school club's finances or help a parent track daily sales and expenses for a kioski or mama lishe business. For example, if a student runs a small chicken poultry project in Buguruni, they can estimate how much money they will receive from selling chickens and plan for the costs of feeds and medicine, ensuring they do not run out of money to continue the project.