Cash Balance for Gumbo Company as of December 1
The cash balance for Gumbo Company as of December 1 should be $8,305. Notably, this cash balance value refers to the cash balance at the start of the month. It is obtained by taking the ending cash balance and considering all the cash-based transactions that occurred during the month in the reverse calculation. According to Robinson, this entails deducting transactions that increase the cash balance and adding the cash transactions that increase the cash balance. The working methodology for the calculation described means that cash received during the period is deducted from the ending cash balance. Additionally, cash amounts paid out during the period to various transactions, such as supplier payments, are added back to the ending balance to attain the opening cash balance. For the case of Gumbo Company, the calculation will be as follows.
| Particulars | Amount in dollars |
| Cash balance as of December 31 | $9,869 |
| Less: | |
| Cash sales | $2,763 |
| Common stock sold | $2,550 |
| Add: | |
| Taxes paid | $2,032 |
| Payments for equipment | $1,496 |
| Dividends Paid | $221 |
| Cash Balance as of December 1 | $8,305 |
Transactions excluded from the calculation: credit sales of $149 and inventory received of $2,125.
As shown above, the cash balance at the start of the month is $8,305. There are some important aspects to note in the above calculation. One of those aspects relates to the nature of transactions to include in the calculation. Notably, only transactions that affect cash are considered in the calculation (Akbar et al. 102). As a result, transactions that are not cash-based are excluded from the calculation. In the case of Gumbo Company, credit sales and inventory received are ignored because they are not cash-based transactions.
Works Cited
Akbar, Ahsan, Xinfeng Jiang, and Minhas Akbar. “Do working capital management practices influence investment and financing patterns of firms?.” Journal of Economic and Administrative Sciences 38.1 (2022): 91-109.
Robinson, Thomas R. International financial statement analysis. John Wiley & Sons, 2020.
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Question 
Cash Balance for Gumbo Company as of December 1
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Gumbo Company had the following transactions in December: What was the December 1 cash
balance?
Transactions
Dividends Paid $221
Credit Sales 149
Payments for equipment 1,496
Taxes Paid 2,032
Common stock sold 2,550
Inventory received 2,125
Cash sales 2,763
Cash balance Dec. 31 9,869
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