Chapter 12 Section 1 CheckPoints

CheckPoints!

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 infromation from business records and other infromation sources for each type of income and expense.
      - Create the budget by calculating each type of income, expense, and the amount 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 ;  Plan 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 operation of the business for a specific period.
    - Cash Budget ; An estimate of the actual money received and paid out for a specific period.