Business Innovations Finance and Accounting Test Review

Definition of personal finance:

Managing money (earning, saving, spending, investing, gifting).

Your relationship with money:

How you personally earn, save, spend, or invest.

Types of income:

Wages, interest, gifts, winnings.

Earning = Income:

These words mean the same thing.

What is a transaction?

An exchange of money for goods or services.

Receipts and invoices:

Proof of what you bought or owe.

GST (5%):

Federal tax.

PST (7%):

Provincial tax.

GST/PST exempt or zero-rated:

Groceries, prescriptions, baby items, some kids’ clothes under $150.

Tangible vs. digital:

Tangible = cash, coins; Digital = debit, credit, PayPal.

What businesses consider:

Cost, speed, security, customer preference.

Counting Up Method:

Add coins/bills to reach the total using the fewest pieces.

Coins and bills in circulation:

5, 10, 20, 50, 100; Toonies, Loonies, quarters, dimes, nickels.

Pennies:

Discontinued in 2013.

What is accounting?

Tracking money coming in and out.

Why is it important?

Helps make smart financial decisions.

Assets:

What you own.

Liabilities:

What you owe.

Accounts Receivable:

Money owed to you.

Accounts Payable:

Money you owe others.

Net Worth (Equity):

Assets - Liabilities.

Formula:

Assets – Liabilities = Net Worth.

Balance Sheet:

Snapshot of money on a specific date.

Income Statement:

Shows income, expenses, and profit/loss over time.

Formula:

Revenue – Expenses = Net income or loss.

RRSP:

Retirement savings, taxed later.

RESP:

Education savings, includes grants.

TFSA:

Tax-free savings/investments.

Two parts of a budget:

Income & Expenses.

Fixed expenses:

Same monthly (e.g. rent).

Variable expenses

Change monthly (e.g

Deficit

Spending more than earned

Pay yourself first

Save part of your income first

How to fix a deficit

Cut spending or earn more

Why and emergency fund matters

Cover surprise costs of 3-6 months

How emergency funds help

Stop you from going into debt when income changes come

Poverty cycle

Trapped in low income and no savings

Poverty Local stat

1 in 10 winnipeggers live in poverty