Module 1 Study Guide

Question 1

The Personal Budgeting Process

Answer 1

1. Gather data, such as recurring & non-recurring income & expenditures.
2. Form expectations, reconcile goals & data
3. Create short-term, long term, and cash budgets using micro and macro factors.
4. Monitoring budget compared to actual activities to notice deviations.
5. Adjust budget, expectations, & goals if needed
6. Revisit budget & refine goals as life situations change

Question 2

Recurring vs Non-Recurring Income & Expenditures

Answer 2

Recurring income is earnings from wages, interest, dividends, social security benefits (including social security disability) and pension income.

Recurring expenditures include living expenses, loan repayments, and regular savings or investment deposits.

Nonrecurring income are “windfalls” and should not be counted on or “budgeted for.”

Nonrecurring expenditures may be for capital (high cost) improvements such as a new roof for your house or for purchases of durable items such as a refrigerator or a car. These are purchases that would not be made each period. However, they are important to take into consideration when preparing your personal budget.

Question 3

Purpose of Cash Budget

Answer 3

a rearrangement of budget items to show each month, both cash inflows and cash outflows, in detail. Irregular cash flows can be placed in the specific months when they will occur, allowing you to see the effects of cash flow timing more clearly.

Question 4

6 Types of Accounts

Answer 4

Assets, Liabilities, Equity, Revenue, Expense, Drawing