Vocab
1. Revenue- all income that a business recieves over a peroid of time
2. Expenses- the costs of operating a business.
3. Budget- provides detailed plans for the needs of individuals, families, and businesses.
4. Start-up Budget- plans income and expenses from the beginning of a new business or a major business expansion until it becomes profitable.
5. Operating Budget- describes the financial plan for ongoing operations of the business for a specific peroid.
6. Cash Budget- an estimate of the actual money recieved and paid out for a specific peroid.
Checkpoint
1. What is the basic financial equation for businesses?
- Revenue- Expenses = profit or Loss
2. What are the 4 steps in preparing a business budget?
- 1.) Prepare a list of each type of income and expense that will be a part of the budget. 2.) Gather accurate information from business records and other information sources for each type of income and expense. 3.) Create the budget by calculating each type of income, expense, and the amount of net income or loss. 4.) Explain the budget to people who need financial information to make descisions.
3. Identify and describe the 3 types of budgets needed by all businesses.
- Start-up Budget- Plans the income and expenses from the beginning of a new business or a major business expansion until it becomes profitable.
- Operating Budget- Describes the financial plan for ongoing operations of the business for a specific peroid.
-Cash budget- An esimate of the actual money recieved and paid out for a specific peroid.
Assessment
1. False. Financial planning is needed by small businesses only until they begin to make a profit.
2. The basic financial equation is
- D. Revenue- Expenses = Profit or Loss
3. True. A cash budget is an estimate of the actual money recieved and paid out for a specific period.
5. A.) $85,695- $72,624 = $13,071
B.) $1,824,300- $2,183,680 = -$359,380
C.) $729,655 - $499,220 = $230,435
