12-1 Assessment

1. False, financial planning is always needed
2. D. revenue-expenses= profit or loss
3. True, cash budget defintition
5.
a. $85,695 - $72,624 = 13,071
b. $1,824,300 - $2,183,680 = -359,380
c. $729,655 - $499,220 = 230,435

12-1 Checkpoint Questions

1. What is the basic financial equation for businesses?
Revenue-Expenses=Profit or Loss

2. What are the four steps in preparing a business budget?

• Prepare a list of each type of income and expense that will be a part of the budget.
• Gather accurate information from business records and other information sources for each type of income or expense
• Create the budget by calculating each type of income, expens, and the amount of net income or loss.
• Explain the budget to people who need financial information to make decisions

3. Identify and describe the three types of budgets needed by all businesses.
Start-Up Budget- money and expenses from beginning, hence start up
Operating budget- financila plan for ongoing operations of the business for a specific period
Cash Budget- an estimate of the money that will be gained or lost for a specific period

Chapter 12-1 Vocabulary

Vocabulary:

• 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- an estimate of the actual money received and paid out for a specific period