12.1 checkpoints

• What is the basic financial equation for businesses? The basic equation is  Revenue - Expenses = Profit or Loss.
• What are four steps in preparing a business budget? 1) prepare a list of each type of income and expense that will be a part of the budget. 2) gather accurate information from the 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.
• Ientify and describe the three types of budgets needed by all businesses. the start-up budget plans the income and expenses from the beginning of a new business or a major business expansion until it becomes profitable. operating budgets describe the financial plans for ongoing operations of the business for a specific period. cash budget is an estimate of the actual money received and paid out for a specific period.