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Unformatted text preview: formation about the organization’s financial health. This information can help you to compare what the
organization predicted would happen to what is actually happening. That information is used by the senior
managers to make important decisions regarding the organization’s future. The three main financial
statements that are produced in addition to the budget are:
All businesses produce financial statements that provide different information
about the organization’s financial health. The Balance Sheet (also called a Statement of Financial Condition or Statement of Financial
Position) The Income Statement (also called a Profit and Loss Statement, Statement of Operations, or
Statement of Earnings) The Cash Flow Statement If you are a manager, you will want to be familiar with these documents so that you can read and interpret
the information. Then you can compare the information to the budget as a means of determining how you
are doing in operating your own division or department. In the following chapters, we’ll look at each of
these statements individually to understand: How the statement is created How to read the statement What the statement tells you, and just as importantly – What the statement does not tell you However, none of these financial statements can be created without information from your organization’s
accounting or bookkeeping information. In fact, you cannot read the budget completely until you have a
basic understanding of certain aspects of accounting, particularly the Chart of Accounts. Download free ebooks at bookboon.com
16 Financial Information Related to the Budget Managing Budgets 3.2 Bookkeeping and the Budget
Bookkeeping is the act of keeping up with the changes in an organization’s accounts. Every time your
organization performs a transaction of any kind, the accounts (books) change. While these changes are not
reflected in the budget, they do affect the budget because you might need to make adjustments to where
your funds are allocated depending on what changes have occurred.
For example, imagine you operate a retail establishment. If you find that...
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- Fall '13