Managing Business Finances, Financial Management (Chapter 17.1)

Explain the finance/accounting function of the business

Financial Planning

Process of setting financial goals and developing plans to meet them.

Revenue

Money that a business receives for selling its goods and services.

Expense

Costs involved in operating a business

Accounting

System of recording transactions and analyzing, verifying, and reporting the results.

Generally Accepted Accounting Principles (GAAP)

Businesses follow These rules, standards, and practices to record and report financial information.

Audit

A review of a business's financial statements and accounting practices used to produce them.

Fiscal Period

The period for which a business summarizes accounting information and prepares financial statements.

Budget

A financial plan that reflects anticipated revenue and shows how it will be allocated in the operation of the business.

Start-up Budget

Budget created in the planning stages of a new business.

Operating Budget

A projection of the sales revenue that will be earned and the expenses that will be incurred during a future period

Cash Budget

Money is coming in and money is coming out.

Accounting Equation

assets = liabilities + owners equity

Assets

the property or items of value a business owns

Current Asset

cash or any asset that will be exchanged for cash or used within one year.

Liability

debted owed to others

Current Liability

a short-term debt that must be paid within one year

Source Documents

Records that prove that a business transaction has occurred. (invoices)