module 1-Personal budgeting Flashcards
Budget equation
income-spending = surplus / deficit
budgeting steps
- Define goal and gather data
- Form expectations reconcile goals and data
- Create budget
- Monitor outcomes, analyze discrepancies
- Adjust budget, expectations or goals.
Recurring income
Earnings from wages, interests, dividends, social security benefits, and pension income.
Recurring expenditures
include living expenses, loan repayments, regular saving or investment deposits
nonrecurring expenditures
includes large capital improvements such as a new roof in your house (things you cant forsee)
what is an asset
anything you own that has value to you.
for a business: in item you use to make money in your business (cash, land, trucks, equipment)
short term asset
something that has value within a year or less
long term asset
something with value for mote than a year Ex. a car
2 assets in business
- accounts receivable
- inventory
accounts receivable
money you were owed by clients (credit)
inventory
the sum of the unsold stock of a business
liability
obligation that you must pay. (bank loans, taxes owed, wages owed.)
financial planning
increasing your assets while you decrease your liabilities
nonrecurring income
sources of income that cannot be counted on (lottery)
personal liquidity
state of possessing liquid assets such as cash and other assets easily converted to cash
Cyclically
If the economy is in a period of contraction or recession, demand for labor is lower, competition among workers is higher, and wages cannot be expected to rise.
Expenses
costs incurred to produce revenues. Expenses are measured by assets surrendered or consumed in serving customers
micro factor
Personal factors such as family structure, health, career choice, and age have significant influence on financial choices and goals.
macro factor
affecting your budget come from the context of the wider economy.
cash budget
rearrangement of budget items to show each month both cash inflows and outflows in detail
budget discrepancy
occurs when the actual results of your financial activity differ from your budgeted projections
factors used to form a budget expectation
- financial history
- micro and macro economic factors
- new information
bank reconciliation
a schedule the company prepares to reconcile or explain the difference between the cash balance on the bank statement and the cash balance on the company’s book.
Bank statement
is a record of your bak accounts transactions prepared by the bank
deposit in transit
a deposit recorded in the personal records in one period but recorded as a deposit by the bank in the succeeding period.
personal records
includes a list of all cash transactions
