Budgeting Basics
Allocation of monetary funds based on a determined structure.
What is gross income?
Total amount of money an individual or business earns from all sources before any taxes or deductions are taken out.
What is the definition of an asset?
Something of value owned by the company.
What is the basic accounting equation?
Assets = Liabilities + Owner's Equity
Which shows numberical balances determined by the chart of accounts?
Balance Sheet
What provides a guide for efficient business decisions?
Budgeting
What is the calculation for net worth?
Net Worth = Assets - Liabilities
What is the definition of a liability?
A debt or obligation owed by the company.
Do credits increase or decrease liabilities?
Credits increase liabilities
Which shows changes that occur in numberical balances?
Transaction Ledger
What are the two basic parts of a budget?
Income; Expenses
What represents the amount of revenue generated by a business?
Sales figures
What is the most liquid asset?
Cash
What are teh rules used to prepare and report financial statements?
Generally Accepted Accounting Principles (GAAP)
Which is also known as a profit and loss statement?
Income Statement
Rent is what type of expense?
Fixed
What is the equation for profit?
Revenue - Expenses = Profit
What type of asset is easiest to convert into cash?
Current assets
What is the purpose of an income statement?
To show a company’s revenues and expenses to determine profit or loss for a period.
What is the last step in the business operating cycle?
Collect payment for credit sales
List the steps involved in creating a budget.
1. Track spending 2. Gather financial records 3. List monthly income 4. List monthly expenses 5. Balance the budget
Which cost is directly assoiated with acquiring or making a product?
Cost of Goods Sold
What are Accounts Payable classified as?
Current Liabilities
What organization sets the accounting standards known as GAAP?
The Financial Accounting Standards Board (FASB).
How many steps are in the business operating cycle?
Nine