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© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 1 12-1 12-1Financial Planning 12-2 12-2Financial Records.

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Presentation on theme: "© 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 1 12-1 12-1Financial Planning 12-2 12-2Financial Records."— Presentation transcript:

1 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 1 12-1 12-1Financial Planning 12-2 12-2Financial Records and Financial Statements 12-3 12-3Payroll Management 12-4 12-4Financial Decision-Making 12 C H A P T E R Financial Management

2 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 2 Job Opportunities Clerks –Sorts and files accounting information Bookkeeper –General accounting work with some analyzing and summarizing Accountant –Person who plans, summarizes, analyzes, and interprets accounting information –Public, Private, CPA –Earn better than average salary $37,000 to $74,000 to start Climb your way to the top!

3 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 Need to know Vocabulary Revenue, Sales, or Gross Income All income Expenses Costs of operation Fixed Costs (Overhead)= bills that do not change based on output Rent, insurance, loan costs, salary workers Variable Costs = bills that differ based on output Materials, hourly workers, Earnings or Net Income Income after taxes and expenses SLIDE 3

4 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 4 BASIC FINANCIAL EQUATION Profit / Loss Difference in revenue and expenses Revenue – Expenses = Profit or Loss (Earnings) Profit Revenue is greater than expenses Revenue > Expenses = Profit Loss Revenue is less than expenses Revenue < Expenses = Loss Break Even Revenue = Costs No profit or loss

5 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 Budget Detailed plans for financial needs Plan of all expenses and income 1.Predict income and expenses 2.Gather accurate information to support prediction 3.Create a budget 4.Share the budget with people who need to know 5.Edit your budget SLIDE 5

6 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 6 TYPES OF BUDGETS Start-up budget plans income and expenses from the beginning of a new business or a major business expansion until it becomes profitable Operating budget describes the plan for ongoing operations for a specific period Cash budget is an estimate of the actual money received and paid out for a specific period.

7 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 Check Book Work Question 1 Identify several unique business expenses for three important times in a business life. Startup, ongoing, expansion Create an operational budget for your daily life, steps 1 to 3 1.Predict income and expenses 2.Gather accurate information to support prediction 3.Create a budget 4.Share the budget with people who need to know 5.Edit your budget SLIDE 7

8 © 2012 Cengage Learning. All Rights Reserved. SLIDE 8 12-2 Financial Records and Financial Statements Goal 1Identify several types of financial records needed by businesses. Goal 2Describe the differences between an income statement and a balance sheet.

9 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 9 FINANCIAL RECORDS Financial records = Financial documents that are used to record and analyze performance of a business Question 2: Difference between budget and Financial Record Budget = Plan, Record = What happened. Both to track and stay on goal Types of records Asset records Depreciation records Depreciation = loss of value over time Inventory records Records of accounts Cash records Question 3: Why is cash budget important? Payroll records Tax records

10 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 Basics of Accounting Assets (A) Anything of value that is owned –Cash, Inventory, Supplies, Accounts Rec. Liabilities (L) Amount owed Accounts Payable Owners Equity (E) Owners stake in the business How much $ invested Assets = Owners Equity + Liabilities –Complete Page 1 Accounting Worksheet SLIDE 10

11 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 Balance Sheet Show assets, liabilities and owners equity Created once or twice a year Googles Balance Sheet Complete PART 3: Balance Sheet SLIDE 11

12 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 Balance Sheet and T-Charts Transaction = a business activity that changes assets, liabilities, or owners equity At least 2 accounts must be used T account debit (dr) credit (cr) Normal Balance Assets = Left Side (dr) Liabilities = Right Side (cr) O.E. = Right Side (cr) Debits = Credits SLIDE 12 Assets = L. + O.E. Left Side Debit Side (A) Right Side Credit Side (L and E)

13 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 T – Chart Practice 1.What accounts are affected? 2.How is each account classified? (Normal Balance) 3.How is each account balance changed? 4.How is each amount entered in the accounts? 5.Do credits = debits? SLIDE 13

14 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 14 Transactions - What Accounts are Affected? 1.Received cash from owner as an investment, 2,000 2.Paid cash for insurance, 600 3.Bought supplies on account from Swans Supply Company 1.Cash, Owners Equity 2.Asset (prepaid insurance), Cash 3.Assets (supplies), Accounts Payable Complete Part 2 of Accounting Worksheet: Transactions on T-Charts

15 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 Income Statement Report of revenue, expenses, and net income or loss Shows all income first, Shows all expenses, Shows the difference McDonalds Income Statement Question 4: What information is in a Balance Sheet that is not in an Income Statement? SLIDE 15

16 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 16 Checkpoint Complete the Lemonade Stand Keep track of all transactions using T Charts Fill out Multiple Balance Sheets Credits = Debits

17 © 2012 Cengage Learning. All Rights Reserved. SLIDE 17 12-3 Payroll Management Goal 1Describe the components of a business payroll system. Goal 2Identify key information included in payroll records and paychecks.

18 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 18 PAYROLL SYSTEMS Legally must pay on time (at least once a month) Must pay taxes for employees Social Security and Medicare Disability Unemployment Take taxes that employees pay from checks Income taxes Social Security and Medicare

19 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 19 SAMPLE EARNINGS REPORT AND DIRECT DEPOSIT RECEIPT

20 © 2012 Cengage Learning. All Rights Reserved. SLIDE 20 12-4 Financial Decision-Making Goal 1Recognize important financial information managers use to make decisions. Goal 2 Identify the steps in making financial decisions in business.

21 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 21 USING FINANCIAL INFORMATION Every decision revolves around $$$ Preparing a budget. Using the budget as a guide to the operation of the business. Making needed adjustments to bring performance in line with the budget Alter budget if it was incorrect / things change Understanding financial performance ratios

22 © 2012 Cengage Learning. All Rights Reserved. Principles of Business, 8e C H A P T E R 12 SLIDE 22 FINANCIAL PERFORMANCE RATIOS Current Liabilities Current Assets =Current Ratio Owners Equity Total Liabilities =Debt to Equity Ratio Net Profit =Return on Equity Ratio Owners EquityNet Income Total Sales =Net Income Ratio Complete Financial Performance Ratio Worksheet


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