Activities involved in managing money Set goals Make economic decisions Spend wisely Live within means
Flexible Expenses Flexible Expenses that can be adjusted or eliminated, such as those for luxuries, as opposed to fixed expenses, such as rent or car payments.
Types of Expenses Fixed expenses do not depend on your consumption of a good or service. A fixed expense is a cost that does not change from period to period or that changes only very slightly. Fixed expenses are usually paid on a regular basis, such as week to week, month to month, quarter to quarter or year to year. Typical household fixed expenses are mortgage or rent payments, car payments, real estate taxes and insurance premiums.
Financial Status Cash flow statement Expenditure
Steps to develop a spending plan to satisfy goals. Budget: allocation of funds Balance your budget Estimate your expenses Estimate your income Plan for savings Set goals for spending
Types of Budgets Start-up: The amount of money needed to begin a company. It includes not only the money to buy needed goods, but also money to cover the initial expenses of the company. Operating:-- a detailed outline of all estimated income and expenses during a given future period. Cash: an estimation of cash payments and receipts during the next planning period.
Successful characteristics to creating a budget Utilize a spreadsheet or worksheet Estimate your income Estimate your flexible expenses Plan your savings Balance and adjust your budget
Classify business items with value Assets – Anything owned by an individual that has a cash value. This includes property, goods, savings or investments. Liabilities – anything that is owed to someone else.
Capital assets available for use in the production of further assets wealth in the form of money or property owned by a person or business and human resources of economic value a seat of government
Show the relationship among assets, liabilities and capital Accounting equation ( A = L + C) Analyze the affects of transactions on the accounting equation Assets = Liabilities + Capital (revenue –expense)
Use T accounts to analyze cash transactions Cash payments/purchase Cash receipts/sales
Record simple business transactions Cash journal
Prepare a simple financial statement Balance sheet Income Statement