Star Ltd operates a retail business where Purchases are sold at cost plus 25%. The information below are forecast for the first 4 months of the year 2020. Month Sales Labour Expenses GH¢ GH¢ GH¢ Jan...

Star Ltd operates a retail business where Purchases are sold at cost plus 25%.

The information below are forecast for the first 4 months of the year 2020.

Month                                 Sales                     Labour                  Expenses

                                                GH¢                       GH¢                      GH¢

Jan                                         40,000                   3,000                     4,000

Feb                                        60,000                   3,000                     6,000

Mar                                        160,000                 5,000                     7,000

Apr                                         120,000                 4,000                     7,000

1. 
   It is management policy to have stock in hand at the end of each month to meet sales demand in the next half month
   


2. 
   Creditors for materials and expenses are paid in the month after the purchases are made and expenses incurred; labour is paid in full at the end of each month. Labour cost and expenses are treated as period cost in the P & L Accounts.
   


3. 
   Expenses include a monthly depreciation charge of GHS2,000.00
   


4. 
   75% of sales are for cash and 25% of Sales are one month credit.
   


5. 
   The company will buy equipment for cash costing GHS18,000.00 in February and will pay a dividend of GHS20,000.00 in March, the opening Cash balance at 1st February, is GHS1,000.00
   

Required:

1. 
   Prepare a Cash Budget for February and March
   


2. 
   Prepare Profit or Loss Accounts for February and March