Interrelation between Cash and Other Balance Sheet and Profit and Loss Items. If to the amount of cash on hand at the beginning of the period we add the cash received from customers, as determined above, and that received from interest income, as indicated by the profit and loss statement, we arrive at the total cash available for use during the period.
Cash expenditures have been made for the following purposes:
1. Payments to creditors for merchandise of $287,000 as above.
2. Inward freight and cartage $15,000, as shown by the profit and loss statement.
3. Sales salaries $19,000. (This amount is determined by considering the expense of $20,000, as shown by the profit and loss statement, in conjunction with the unpaid sales salaries, as shown by the comparative balance sheet. Thus, if to the unpaid sales salaries amounting to $1,500 at the beginning of the period, we add the sales salary expense of $20,000 incurred during the period and from their sum we subtract the amount of unpaid salaries, $2,500, at the end of the period, we arrive at the amount of $19,000 spent for salaries during the period.)
4. Advertising $30,000.
5. Sundry selling expense $10,000.
6. Office salaries $10,500.
7. Insurance $3,750. (This amount is also determined by considering the amount of unexpired insurance as shown by the comparative balance sheet in conjunction with the cost of insurance used during the current period, as shown by the profit and loss statement. It will be noted that $250 worth of insurance was in force at the beginning of the period, that $3,000 worth of insurance was used during the period—hence it must have been necessary to buy additional insurance amounting to $2,750 during the period. When we find, however, that there is unexpired insurance at the end of the period amounting to $1,000, it will be seen that there must have been purchased during the period $3,750 worth of insurance.)
8. Sundry office expense $2,000.