Personal Finance
Chapter 12
12-1 Key Terms:
Revenue –
Expenses –
Budget –
Start – up budget
Operating budget –
Cash budget -
12-1 Checkpoints:
What is the basic financial equation for businesses?
What are the four steps in preparing a business budget?
Identify and describe the three types of budgets needed by all businesses..
12-1 Assessment:
1. True or False… Financial planning is needed by small businesses only until they begin to
make a profit.
2. The basic financial equation is
a. revenue – profit = loss
b. expenses + revenue = profit or loss
c. profit – loss = revenue and expenses
d. revenue – expenses = profit or loss
3. True or False… A cash budget is an estimate of the actual money received and paid out for
a specific period
12-2 Key Terms:
Financial records –
Assets –
Liabilities –
Owner’s equity –
Balance sheet –
Income statement -
12-2 Checkpoints:
How has the process of maintaining financial records been affected by technology?
What is the difference between a balance sheet and an income statement?
12-2 Assessment:
1. The value of the buildings and equipment owned by a business can be determined in the:
a. inventory records
b. asset records
c. records of accounts
d. tax records
2. True or False…The two most common and important financial records for businesses are
the income statement and the balance sheet..
3. Current liabilities are amounts owed that will be paid in less than
a. one month
b. six months
c. one year
d. five years
4. The current value of investments made by the owners of a business can be found in the
a. income statement
b. balance sheet
c. tax records
d. record of account
12-3 Key Terms:
Payroll –
Payroll records –
Direct deposit –
12-3 Checkpoints:
What is the purpose of the payroll system?
What is the difference between a payroll record and an earnings report?
12-3 Assessment:
1. The financial records of employee compensation, deductions, and net pay are known as:
a. compensation
b. payroll
c. earnings report
d. paycheck
2. True or False… Businesses are responsible for making responsible for making required
federal and state payments for each employee..
3. The electronic transfer of net pay into an employee’s bank account is known as
a. tax withholding
b. FICA
c. direct deposit
d. an automated payroll system
12-4 Key Terms:
Financial performance ratios –
Discrepancies –
12-4 Checkpoint:
Identify four important financial performance ratios used by managers to determine how
well the business is performing.
List the three steps in financial decision-making..
12-4 Assessment:
1. Which of the following is NOT one of the three most important elements of a company’s
financial strength?
a. assets
b. owners’ equity
c. payroll
d. liabilities
2. True or False… Sales and profits for a specific period are reported in a company’s income
statement.
3. True or False… Employees rather than managers are responsible for the financial health of
a company..
4. Differences between actual and expected performance are:
a. financial performance
b. budgets
c. profit or loss
d. discrepancies