A cash budget is a financial statement that estimates the expected cash inflows, cash outflows and resulting cash balance of a business for a specified future period. It is an important tool of management accounting because it helps managers plan and control the cash position of the organisation. Unlike a profit and loss statement, which records revenues and expenses according to accounting principles, a cash budget focuses specifically on the timing of actual cash receipts and payments. Thus, it helps management determine whether sufficient cash will be available to meet obligations when they become due. The main purpose of a cash budget is to forecast the cash position of a business. A firm may earn profits but still face a cash shortage if customers delay payments or if large payments become due before cash is collected. Similarly, a business may have sufficient cash temporarily even when its profitability is low. Therefore, cash planning is essential for maintaining liquidity and ensuring smooth business operations. A cash budget generally covers a particular period, such as a month, quarter, half-year or year. It is prepared by estimating cash receipts and cash payments during each period. The opening cash balance is added to expected cash receipts, and expected cash payments are deducted from the total. The resulting figure represents the expected closing cash balance. The basic structure of a cash budget can be expressed as: Opening Cash Balance + Expected Cash Receipts − Expected Cash Payments = Closing Cash Balance The opening cash balance represents cash available at the beginning of the period. Cash receipts include collections from cash sales, collections from credit customers, interest received, dividends received, loans raised, issue of shares, sale of assets and other sources of cash. Cash payments include payments for purchases, wages, salaries, rent, administrative expenses, selling and distribution expenses, taxes, capital expenditure, loan repayments, interest and other cash expenses. Preparation of a