Checkpoints/Assessment Chapter 12

Checkpoints

What is the basic financial equation for businesses? Revenue - Expenses = Profit or Loss
What are four steps in preparing a business budget?
1) Prepare a list of each type of income and expense that will be apart of the budget.
2) Gather accurate information from business records and other information sources for each type of income an 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 decisions.
 Identify and describe the three types of budget needed by all businesses.
Start-up Budget- plans 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 period.
Cash Budget- is an estimate of the actual money received and paid out for a specific period.

Assesment

1) Finanical planning is needed by small businesses only until they begin to make a profit. FALSE
2)The basic financial equation is D. Revenue - Expenses = Profit or Loss
3) A cash budget is an equation of the budget is an estimate of the actual money recieved and paid out for a specific period. TRUE
5)85,695 - 72,624 = 13,071 PROFIT
   1,824,300 - 2,183,680 = -359,380 LOSS
   729,655 - 499,220 = 230,435 PROFIT

Vocabulary Chapter 12

Revenue- all income that a business receives over a period of time.
Expenses- the costs of operating a business.
Budget- provides detailed plans for the financial needs of individuals, families, and businesses.
Start-up Budget- plans 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 period.
Cash Budget- is an estimate of the actual money received and paid out for a specific period.