What is the basic financial equation for businesses?
Revenue - Expenses = Profit/Loss
What are the four steps in preparing a business budget?
1. Prepart a list of each type of income and expense
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
Identify and describe the three types of budgets needed by all business.
Start-up Budget - Plans income and expenses from the beginning of a new business or major business expansion
Operating Budget - Describes the financial plan for ongoing operations of the business for a specific time. The operating budget is usually planned for three months, six months, or a year.
Cash Budget - An estimate if the actual money recieved 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.
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