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Revenue
All of the income that a business receives over a period of time.
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Expenses
The cost of operating a business.
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Profit
When revenue is greater than expenses.
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Loss
When expenses exceed revenue, the business will suffer a loss.
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Budget
Provides detailed plans for the financial needs of individuals, families, and businesses.
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Start up budget
Plans income and expenses from the beginning of a new business or a major business expansion until it becomes profitable.
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Operating Budget
Describes the financial plan for ongoing operations of the business for a specific period.
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Cash Budget
A estimate of the actual money received and paid out for a specific period.
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Financial Records
Used to record and analyze the financial performance of a business.
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Types of Records
- Asset records-identify the buildings and equipment owned by the business.
- Depreciation Records- identify the amount assets have decreased in value due to their age and use.
- Inventory records- identify the type and quantity of resources and products on hand, along with the current value of each.
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Types of Records Continued
- Records of Accounts- identify all purchases and sales made using credit.
- Cash Records-list all cash received and spent by the business.
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Assets
What a company owns
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Liabilities
The expenses that the company owns.
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Owner's equity
The value of the owner's investment in the business
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Balance Sheet
Shows the assets, liabilities, and owner's equity for a specific date
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Income Statement
Used to report revenue, expenses, and net income or loss from operations for a specific period.
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Payroll
The financial record of employee compensation, deductions, and net pay.
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Payroll Records
Documentation used to process earnings payments and record each employee's pay history
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Direct Deposit
The employer transfers net pay electronically into the employee's bank account.
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Income Taxes
The federal government, state, and some local governments require employers to withhold income tax from their employees' pay.
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Social Security and Medicare
The gov. requires employers to withhold these deposits.
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Unemployment Taxes
Employers pay Federal Unemployment Tax tot he unemployment insurance system.
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Financial Performance Ratios
Comparisons of a company's financial elements that indicate how well the business is performing.
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Discrepancies
Differences between actual and budgeted performance
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Net income ratio
Total sales compared to the net income
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