1. MAINTAINING FINANCIAL INFORMATION
Chapter 14
2/17/2019
Unit 6, Part 3
MAINTAINING FINANCIAL INFORMATION
Identify common sources of financial information for small businesses.
Describe the three types of business budgets.
Outline the primary financial records needed to manage a small business.
Explain the financial statements used by business owners for decision making.

2. Chapter 14
2/17/2019
FINANCIAL PLANNING
A business budget has two purposes: 1. to anticipate sources and amounts of income, and 2. to predict the types and amounts of expenses for a specific business activity or the entire business.
Think of some businesses and make a list of expenses and income that business might have
Why might successful businesses spend a great deal of time making and following budgets?
What kinds of records should a business keep?
Customer preferences records, employee records, equipment and inventory records
Could a business operate without financial planning?

3. TYPES OF BUDGETS Start-up budget Operating budget Cash flow budget
Chapter 14
2/17/2019
TYPES OF BUDGETS
Start-up budget
Operating budget
Cash flow budget
Startup budget – plans income and expenses from the beginning of the business until it becomes profitable
Operating budget – describes the financial plan for the ongoing operations of the business. Usually planned for six months to a year
Cash budget –estimate of the actual money received and paid for a specific time period
Discuss revenue and expenses and how they equal net income
Discuss balance sheet, assets, liabilities and owners equity

4. 1. Prepare a list of each type of revenue and expense
Chapter 14
2/17/2019
STEPS IN BUDGETING
4. Show and explain the budget to people who need financial information to make decisions
3. Create the budget by calculating each type of revenue, expense, and amount of net income or loss
2. Gather accurate information from business records and other sources for each type of revenue and expense
The goals of budgeting are to determine sources of income and how it will be distributed.
1. Prepare a list of each type of revenue and expense

5. FINANCIAL RECORDS Cash records – cash receipts & payments
Chapter 14
2/17/2019
FINANCIAL RECORDS
Cash records – cash receipts & payments
Records of accounts – Accounts Payable and Receivable
Inventory records – Merchandise for sale
Payroll records – employees and their earnings
Asset records – things of value
FINANCIAL RECORDS ARE USED TO RECORD AND ANALYZE THE FINANCIAL PERFORMANCE OF A BUSINESS
Cash records - list all cash receipts and disbursements
Records of accounts - accounts payable and accounts receivable, show all credit purchases and sales
Inventory records - type and quantity of merchandise available for sale
Payroll records - information on employees and their earnings THIS IS ONE OF THE MOST IMPORTANT FINANCIAL RESPONSIBILITIES OF A BUSINESS - a separate record is kept to keep track of payroll.
Asset records - identify building and equipment owned by the business (things of value)

6. FINANCIAL STATEMENTS Balance sheet – A = L + O Income statement
Chapter 14
2/17/2019
FINANCIAL STATEMENTS
Balance sheet – A = L + O
Assets = Liabilities Plus Owners Equity
Income statement
Revenue – Expenses = Net Income or (net loss)
Financial statements - reports that summarize the financial performance of a business
Balance sheet - shows lists assets, liabilities and owners equity
Income statement - reports revenues, expenses and net income or loss
Net income - when revenues exceed expenses
Net loss - when expenses exceed revenues