Econ & Financial SERVICES NOTES

What’s the accounting equation?

Assets = Liabilities + Owner Equity

What are Chart of Accounts?

An organized list of every account a business use to record transactions . Usually numbered and grouped by type.

What are the 5 Chart of Accounts?

Assets , Liabilities , Equity , Revenue , Expenses

Why does the chart matter?

A clear chart makes reports useful and prepare you for software

What does the Federal Reserve do?

Conduct monetary policy, supervise & regulate banks , maintain financial stability , provide payment services

The board of governors are?

7 members in Washington, D.C. Appointed by the President and confirmed by the Senate. Sets overall policy direction.

The 12 Regional Federal Reserved Banks are?

Located across the country. Carry out day-to-day operations, research, and bank supervision in their districts.

What is FOMC?

Federal Open Market Committee. The main body that decides monetary policy (interest-rate targets and open-market operations).

What does Interest Rate Target?

The Fed influences short-term rates (including the federal funds rate). Lower rates → cheaper borrowing → more spending & investment. Higher rates → the opposite.

What are the Reserve Requirements & Other Tools?

Rules about how much banks must hold in reserve, plus other facilities that affect liquidity and credit conditions.

What does fed actions affect?

Fed actions affect borrowing costs, inflation, jobs, and overall economic health.

Why is FOMC important ?

Its main policy body is the FOMC; it uses interest-rate targets and open-market operations.

Who has an dual mandate?

The Fed is the U.S. central bank with a dual mandate: maximum employment and price stability.

What is a Maximum Employment ?

Help the economy reach the highest level of employment that is sustainable without causing too much inflation.

What is a Price Stability?

Keep inflation low and stable so the dollar keeps its purchasing power over time. Target is generally around 2% inflation.

Why accurate financial record are import in a market economy?

In a market system, private businesses (not the government) make most production and pricing decisions. They need accurate information to survive and compete.

What is a Scarcity?

Unlimited wants + limited resources. Everything has a cost because resources are finite.

What is a Opportunity Cost

The next-best alternative you give up when you make a choice.

What is a Factors of Production

Land, labor, capital, and entrepreneurship — the resources used to produce goods and services.

What is a Basic Economic Questions

What to produce? How to produce? For whom to produce?

Good financial information does what?

improves both personal and business choices.

What are the 4 Economic Systems?

market , Command , Mixed , Traditional .

What is a Market?

Private ownership

Decisions by individuals

Profit motive

Prices coordinate

What is a Command?

Government ownership

Central planning

Goals set by state

Less individual choice

What is a Mixed?

Blend of both

U.S. is mixed

Private + regulation

Most modern economies

What is a Traditional

Custom & tradition

Barter often used

Roles inherited

Stable but slow change

What are the 3 functions of money?

Medium of Exchange , Store of Value , Unit of Account .

What is a Medium of Exchange?

Accepted as payment for goods and services. Eliminates the need for barter.

What is a Store of Value

Holds purchasing power over time so you can save and spend later.

What is a Unit of Account?

Provides a common measure of value so prices and records can be compared.

What are the 6 Internal Controls?

Dual Control, Audit Trail , Access Limits , Reconciliation , Separation of Duties , Surveillance & Review .

What is a Surveillance & Review?

Cameras, managers, and periodic checks

What is Separation of Duties?

No one person controls every step

What is a Reconciliation

Regularly matching records to actual balances

What is a Access Limits?

Passwords, permissions, and restricted areas

What is a Audit Trail?

A log of who changed what and when

What is a Dual Control?

Two people required for certain actions.

What Improves a business’s Chance of a Loan?

Clean, up to date financial statements, Consistent record-keeping , Positive cash flow history, Strong personal and business credit , Clear purpose for the funds.

What is a Clean, up to date financial statements

Profit & Loss, Balance Sheet , Cash Flow

What is a Consistent record-keeping ?

Shows the lender you mange money carefully.

What is a Positive cash flow history?

Proves the business can generate money to repay.

What is a Strong personal and business credit?

Payment history matter for both owner and company

What is a clear purpose for the funds?

Lenders prefer specific productive uses of money

What are the major type of credit ?

Revolving , Installment , Open/Service

What is revolving ?

Credit Cards , Line of Credit . You can borrow, repay , and borrow again up to a limit

What is installment ?

Car loans, Mortgages , Student loans . Fixed payments over a set period until the debt is paid .

What is a Open/Service?

Utilities , Cell phone and Medical bills .You receive the service fist and pay later according to terms.

What are the 5 C’s?

Character , Capacity , Capital , Collateral , Conditions .

What is a Character ?

Reputation and payment history .

What is a Capacity ?

Ability to repay from income or cash flow .

What is a Capital?

Your own money or assets already invested.

What is a Collateral?

Assets the lender can claim if you default

What is a Conditions?

Purpose of the loan and current economic climate

What are the 5 things Accounting software does?

Record Transactions, Organizes Information , Produces Reports , Supports Controls , Saves time

What is Saves time?

Automates recurring entries , bank feeds , and basic calculations

What is Support Controls?

User permissions , audit logs , and separation of duties.

What is Organizes information ?

Customer , Vendors , Products / Services and the Chart of Accounts

What is Records transactions?

Sales , Expenses , payments , deposits/ everything that moves money

What is a Produce Report?

Profit & Loss, Balance Sheet , aging reports and more on demand .

What is a Audit Trail Log?

A permanent record of who created , changed or deleted transactions and settings.

Why does Audit Trail/Log matter?

Detects errors and fraud

Supports internal control

Required for many audits

Builds trust with lenders and owners

What has to be set up before a business can track money in order?

1. Company Info

2. Chart Of Accounts

3. Lists

4. User & Permissions

5. Opening Balances

What are the key economic indicators?

GDP(Gross Domestic Product) , Unemployment Rate , and Inflation Rate

What is a Economic Growth?

An increase in the amount of goods and services an economy produces over time. Usually measured by rising real GDP. More growth generally means more jobs and higher living standards — if shared broadly.

What is a Economic Stability?

A situation where growth is steady, inflation is low and predictable, and unemployment stays at healthy levels. Avoids big booms and deep recessions. Gives households and businesses confidence to plan.

What is a Inflation Rate?

How fast the overall price level is rising (often measured by CPI). Moderate inflation (~2%) is the Fed’s usual target. High inflation erodes purchasing power.

What is a Unemployment Rate

Percent of the labor force that is without a job but actively looking. Too high = weak economy. Extremely low can signal overheating.

What is a GDP(Gross Domestic Product)

Total value of final goods and services produced in a country in a period. Real GDP adjusts for inflation. Rising real GDP = growth.

What is the outcome of these signals?

Healthy Expansion.

What is the outcome of these signals?

Possible recession or slowdown

What is the outcome of these signals?

Economy may be overheating

What is the outcome of these signals?

Difficult policy challenge

How Indicator Link to the Fed & Daily Life?

1.  The Fed watches these indicators closely when deciding whether to raise, lower, or hold interest rates.

2.  Businesses use the same data to decide on hiring, inventory, and expansion.

3.  Households feel the effects through job availability, wage growth, grocery prices, and loan rates.

4.  Accurate business records (the kind QuickBooks will help with later) become even more important when the economic environment is changing.

Why businesses and governments issues securities?

Raise Capital , Spread risk / share ownership , Match financing to needs , Governments too .

What are the basic steps of loan creation?

1. Application

2. Evaluation

3. Decision

4. Documentation

5. Funding & Servicing

What is Stocks (Ownership )?

Represent ownership in a company. Shareholders may receive dividends and can benefit if the company value rises. Higher potential return, higher risk. No guaranteed payment.

What is a Bonds (loan) ?

Represent a loan to a company or government. Bondholders receive interest payments and the principal back at maturity. Generally lower risk than stocks (but not risk-free).

Fixed income stream if held to maturity.

What is a Raise Capital

Fund expansion, new projects, equipment, or operations without relying only on bank loans.

What is a Spread Risk/Share ownership ?

Issuing stock brings in owners who share both the upside and the risk.

What is a Matching financing to needs?

Bonds can provide large sums with fixed repayment schedules; stock does not require repayment of principal.

What is a Government too ?

Governments issue bonds (Treasury, municipal) to finance public projects and deficits.