Financial Management

all income that a business receives over a period of time

costs of operating a business

detailed plans for the financial needs of individuals, families, and businesses

• 2 Main Purposes:
• 1. Anticipate sources and amounts of income for a business
• 2. Predict the types and amounts of expenses for a specific business activity or the entire business

• 1. Prepare a list of each type of income and expense that will be a part of the budget.
• 2. Gather accurate information from business records and other information sources for each type of income and expense.
• 3. Create the budget by calculating each type of income, expense, and the amount of net income or loss.
• 4. Explain the budget to people who need financial information to make decisions.

Plans income and expenses from the beginning of a new business or a major business expansion until it becomes profitable.

describes the financial plan for ongoing operations of business for a specific period

an estimate of the actual money received and paid out for a specific period

used to record and analyze the financial performance of a business

identify the buildings and equipment owned by the business, their original and current value, and the amount owed if money was borrowed to purchase the assets

identify the amount assets have decreased in value due to their age and use

identify the type and quantity of resources and products on hand along with the current value of each. Accurate records are crucial to determine if adequate resources are available to meet operating and production needs as well as customer demand.

• identify all purchases and sales made using credit.
• - accounts payable record: identifies the companies from which credit purchases were made and the amounts purchased, paid, and owed.
• - accounts receivable record: identifies customers that made purchases using credit and the status of each account.

list all cash received and spent by the business

contain information on all employees of the company, their compensation, and benefits.

show all taxes collected, owed, and paid.

what the company owns

what the company owes

the value of the owner's investment in the business

where assets, liabilities, and owner's equity for a specific date are listed

reports the revenue, expenses, and net income or loss from operations for a specific period

the financial record of employees compensation, deductions, and net pay

the documentation used to process earnings payments and record each employee's pay history

auto transfer to employee's savings, etc.

comparisons of a company's financial elements that indicate how well the business is performing

differences between actual and budgeted performance