Cash is needed not only for paying everyday expenditure but lacking cash, we can not purchase any fixed assets also. Excellent planning of cash will make us easy to hold our expenditures and proper spending. The plan which helps us to use cash systematic way is called cash budget. Technique of making cash budget is called cash budgeting. In cash budgeting, we add all estimated cash which we receive from others in future and deduct all estimated cash which we have to pay for removing our liabilities. Its difference will shows estimated cash which will be our pocket. After spending of year, we compare this cash budget with actual receipt and payments. If our real cash receipt is more than budgeted cash receipt then this will be our favorable position. On the other hand, if budget cash receipt is more than actual, then this will be unfavorable position. We can also evaluate budgeted payments with actual payment.
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