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