PBMF Chapter 12 Section 2 Financial Records and Statements

An accounts receivable record identifies the companies from which credit purchases were made and the status of each account.

• true
• false

Sales, expenses, and profits or losses for a specific period are reported in a company’s income statement.

• true
• false

Assets – Liabilities = Owner’s Equity.

• true
• false

At the end of the period covered by a budget, the business will prepare new financial statements.

• true
• false

A business will make a profit if

• revenue equals expenses.
• revenue is greater than expenses.
• expenses decrease and revenue increases.
• expenses are greater than revenue.

When a business expands,

• profits will increase.
• employees will likely be fired.
• marketing activities can be put on hold temporarily.
• new factories and equipment may be needed.

For businesses that have operated for several years, the main source of budget information is

• the business’s financial records.
• the Internet.
• the Small Business Administration.
• business magazines and newspapers.

Which of the following generally is NOT a goal of a business budget?

• to determine the sources and amounts of income
• to predict the types and amounts of expenses for the business
• to convince employees to take a big pay cut so the business can avoid  bankruptcy
• to determine how income will be distributed to cover expenses

The first step of the budgeting process is to

• prepare a list of each type of income and expense that will be part of the budget.
• calculate each type of income, expense, and the amount of net income or loss
• explain the budget to people who need to make financial decisions
• gather accurate financial information

Which type of budget is an estimate of the actual money received and paid out for a specific period?

• an accounting budget
• a final budget
• a cash budget
• a balanced budget