 The cash budget combines data from the cash collections budget and the cash payments budget This is why the cash budget is sometimes called the combined cash budget This is one of the few budgets that we complete vertically rather than horizontally This means we're going to complete one month or quarter completely before we move on to the next This is because the ending balance for one quarter becomes the beginning balance in the next quarter So remember to complete this budget Again one month or one quarter at a time The cash budget is the ninth budget completed in the master budget process and it's a financial budget rather than an operating budget So let's look how to complete this budget We start with our beginning cash balance Which is the prior quarters ending balance here? I've just assumed it's $20,000 we add Q1 cash collections from the cash collection budget and We subtract Q1 cash payments from the cash payment budget This gives us a subtotal called ending cash balance before financing So I've added this twist in order to show you how business's budget short-term financial needs Let's assume that a new corporate policy Policy requires a hundred thousand dollars of cash on hand at the end of each quarter Since we only have budgeted $55,500 we will need to borrow an additional $44,500 So our ending cash before financing plus our new borrowings gives us a hundred thousand dollars ending cash balance for Q2 We add the Q2 cash collections and subtract the Q2 cash payments This gives us our ending cash balance before financing Since the ending cash balance looks to be enough to pay off the loan. Let's plan on doing that We subtract the principal payment of a $44,500 and the interest payment of $445 I've calculated the interest as $44,500 of principal times 4% annual interest times three twelts because one quarter of the year is three twelts of the year This gives us an ending cash balance of a hundred and three thousand three hundred and fifty five dollars Q3 is calculated the same as the prior quarters since we have Budgeted more than a hundred thousand dollars of ending cash. We don't need to borrow any Q4 is also calculated the same as any of as the prior quarters Finally, here's our completed combined cash budget which shows our cash collections our payments and financing Building this budget in excel is pretty straightforward as it relates to collections and payments Those amounts would just be linked to the related sales in the cash collections and cash payment budgets Actually, the tricky formula is the financing to truly have this automated you would want to use an if formula