2. Financial Planning
Financial plan = outline of your expenses, needs, and
goals, and how you expect to meet them
Financial planning
1st step – identifying your assets
Asset = any property or item of value that your business owns
Examples: cash, equipment, buildings, supplies, inventory, land
2nd step – purchasing your assets
Do you need to borrow money?
3rd step – recognizing the financial records you need to keep
Financial forecast = estimate of what business conditions
will be like in the future
3. Accounting
Accounting = systematic process of recording
and reporting the financial position of a
business.
Financial manager = person in charge of a
business’s financial planning, funding, and
accounting.
Budget = written plan of what you expect your
income and expenses to be over a certain period
of time.
4. Financial Records
Fiscal year = reports are for one year
Summarize the year with an income
statement and a balance sheet.
5. Financial Statements
Assets = Liabilities + Owner’s Equity
The two sides of the equation must always
balance
Liability = amount your business owes (debt)
Owner’s Equity = equal to the assets minus
liabilities (what the business is worth)
6. Income Statement
Income Statement = a report of net
income or net loss over an accounting
period
Includes revenue and expenses
If revenue is greater than expenses, you have
a net income
If expenses are greater than revenue, you
have a net loss
Example on next slide
7.
8. Balance Sheet
Balance Sheet= a report of the financial
state of your business on a certain date.
Includes assets, liabilities, and owner’s
equity
Assets on the left side
Liabilities and owner’s equity on the right side
The two sides must equal, or balance
Example on next slide
