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Business Test Ch. 12Reven
Terms in this set (43)
All income that a business receives over a period of time.
The costs of operating a business.
Basic Financial Equation
Revenue - Expenses = Profit or loss
Revenue is greater than expense.
Expenses exceed revenue.
Provides detailed plans for the financial needs of individuals, families, and businesses.
1. Anticipate sources and amounts of income.
2. Predict the types and amounts of expenses for a specific business activity or the entire business.
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 decisions.
Start - up Budget
Plans income and expenses from the beginning of a new business or a major business expansion until it become profitable. >3 yrs
Describes the financial plan for ongoing operations of the business for a specific period. (6 - 12 months)
Is an estimate of the actual money received and paid out for a specific period. A cash budget anticipates that cash will come into a business and that cash will be paid out during each week or month of operation.
Are used to record and analyze the financial performance of a business. Several types of records are maintained.
Types of Records
Records of Accounts
Names the buildings and equipment owned by the business, their original and current value, and the amount owned if money was borrowed to purchase the assets.
Identifies the amount of assets have decreased in value due to their age and use.
Identifies the type and number of products on hand for sale. Adequate records are crucial to correctly determine the number of products sold, damaged, or lost and the current value of that inventory.
Records of Accounts
Identifies all purchases and sales made using credit.
Accounts Payable Record
Identifies the companies from which credit purchases were made and the amount purchased, paid, and owned.
Accounts Receivable Record
Identifies customers that made purchases using credit and the status of each account.
Lists all cash received and spent.
Contain information on all employees of the company their compensation, and benefits.
Shows all taxes collected owed, and paid.
What a company owns.
What a company owes.
The value of the owners' investment in the business.
Reports that sum up the financial preformance of a business.
Where a company reports its assets, liabilities, owner's equity, and net profit.
Sales and Profits
Two key financial elements for a business.
Where sales and profits are reported.
Includes cash and those items that can be easily converted into cash.
Long-term Assets (Fixed Assets)
The assets with a lifespan of more than a year.
Amounts owed by the businesses to others.
Those liabilities that will be paid within a year.
Long Term Liabilities
Debts that will continue for longer than a year.
The value of the business after liabilities are subtracted from assets.
Usually covers six months or a year. o report the revenue, expenses, and net income or loss from operations for a specific period.
All income received by the business during the period
Operations, purchase of equipment, supplies, inventory, payroll and taxes.
Revenue is greater than expenses.
Expenses are greater than income.
Is the financial record of employee compensation`, deduction, and net pay.
The taxes that consist of income taxes, Social Security, Medicare, and unemployment taxes.
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