Budgeting Common Terms And Definitions

Interest rates vary drastically depending on the terms of the loan, and what type of loan it is. You could have one loan with a 2.5% interest rate and other at 25%.

budget terminology for dummies

This system enables agencies to develop allotment packets on line. It supports allotment development, management, review, reporting and monitoring needs for state agencies, OFM and the Legislature. A party to a subcontract who does trade work for a contractor , which work included under the prime contract between the same contractor and an owner; one who is defined as a subcontractor by the prime contract. The major part of a project manual, but excluding the bidding documented, contract agreement, and the conditions of the contract; the written descriptions of items of work that complement the construction drawings. The Revised Code of Washington is the compilation of all permanent state laws now in effect. It is a collection of session laws , arranged by topic, with amendments added and repealed laws removed. Any of the major activities of an agency expressed as a primary function or organizational unit.

A Budget Calculator

In contrast to variable cost, fixed cost refers to expenses for a company that stay the same, regardless of production. The total cost of producing the goods sold by a business is called cost of goods sold . COGS includes the direct costs of creating goods, including materials and labor, and it excludes indirect costs, such as distribution expenses.

budget terminology for dummies

Other charges that are categorized as fees include tolls and tuition. The Legislature may set the rates in statute or authorize a state agency to set rates using administrative procedures. Economic life in the context of cost/benefit analysis refers to the span of years necessary to compare similar costs of operating and maintaining alternative solutions. It may not equate to the time required to fully depreciate the structure.

Your Variable Costs

A listing prepared by OFM of all dollar appropriations contained in legislation, along with an assigned code for use in allotment preparation and other accounting requirements. The three-character code assigned by OFM to identify each legislative or executive authorization to incur expenditures. Agencies are to use only those expenditure authority codes that have been authorized in writing by OFM. The assigned codes are valid only for the biennium for which they are established. Caseload, economic, or demographic factors that have a significant effect on the state budget.

budget terminology for dummies

Then, next to each category, list the total amount you’ve budgeted. Finally, create another column to the right—when the time period ends, use it to record the actual amounts spent in each category. This gives you a snapshot of your budget that’s easy to find without diving into layers of crowded spreadsheets. This is the amount you expect to make from the sale of goods or services. It’s all of the cash you bring in the door, regardless of what you spent to get there.

Cash Flow

Interactive cost estimating is additional work beyond basic services in which additional design alternatives are estimated. Independent cost estimating, if needed, covers cost estimates by an independent third party contracted with the owner and used to validate cost estimates prepared by the A/E. Liabilities reflecting the obligation to pay for goods or services that have been incurred or received but not paid for by the end of the accounting period. Accrued liabilities related to refunds of revenue are offset to the revenue originally recorded.

  • Using GAAP can improve the consistency and transparency of financial reporting across organizations.
  • This system enables agencies to develop allotment packets on line.
  • An enterprise application developed as a tool to assist agencies in building all components of the decision package and submitting operating and transportation budget requests on line.
  • It is the ratio of amount of money that you get back after putting in money for an investment.
  • Types of accrual accounts include accrued interest, accounts receivable, and accounts payable.

ABS supports multiple budget versions to assist agencies in developing operating and transportation budget requests. ABS was launched June 11, 2018, and replaced the aging Budget Development System . Internal rate of return method – Finds the interest yield of the potential investment. Sales forecast – The projection of potential sales for the industry and the company’s expected share of such sales. Direct materials budget – An estimate of the quantity and cost of direct materials to be purchased. Flexible budget – A projection of budget data for various levels of activity. Static budget – A projection of budget data at one level of activity.

Basic Accounting Terminology And Concepts

The total amount for design services contingency ranges from 5 to 10 percent of total consultant services cost depending on the complexity of the project. The process for achieving, verifying, and documenting that the performance of a building and its various systems meet design intent together with the owner and occupants operational needs. The process extends through all phases of a project, from initial concept to occupancy and operation, and includes the training of maintenance personnel. A debt instrument issued through a formal legal procedure and secured either by the pledge of specific properties or revenues or by the general credit of the state. Also know as a proposal or a tender; often called a prime bid when made by a construction company that hopes to become the prime contractor, or a sub-bid when made by a company that hopes to become a subcontractor. An agency’s plan of estimated expenditures, revenues, cash disbursements, and cash receipts for each month of the biennium. Expenditures that meet the appropriate recognition criteria of the account type involved but have not been paid.

Title to the property involved may transfer to the state either upon exercise of an option or at the termination of the contract. Revenues that meet the appropriate recognition criteria of the fund type involved, but are not realized until a subsequent accounting period. Internal rate of return – The rate that will cause the present value of the proposed capital expenditure to equal the present value of the expected net annual cash flows. Cost of capital – The rate of return that management expects to pay on all borrowed and equity funds. Retained earnings, also called an earnings surplus, refers to the amount of net income left for a business to use after paying dividends to its shareholders.

Accruals affect businesses’ net income and must be documented before financial statements are issued. Cash flow budgets help to examine past practices to examine what’s working and what’s not and make adjustments. For example, a company could apply for a short-term working capital line of credit from a bank to ensure they cash in the event a client pays late. Also, companies can ask for more flexible options for their accounts payables, which is money owed to suppliers to help with any short-term cash-flow needs.

Use the previous year’s sales or industry benchmarks to take a best guess at the amount of inventory you need. A little upfront research will help ensure you’re getting the best prices from your vendors and shipping the right amount to satisfy need, mitigate shipping costs, and fit within your budget. While every good budget has the same framework, you’ll need to think about the unique budgeting quirks of your industry and business type.

This number helps you to determine if you got a little, a lot, or even lost money from an investment. It is only available to individuals working for specific companies or businesses. As inflation causes the rise of prices, the amount of goods and services that currency can purchase is decreased. A loan is a debt in which the borrower receives an amount of money and is required to pay it back. This money is what you get before it is taxed, as in, you do not get to keep all of your earned gross income. Essentially, active income is earned by doing a job and getting paid for that job.

The amount of taxes that are taken out of your paycheck varies depending on if you are a W2 salaried worker, are self-employed, and how you earned the money. This form of income is very popular amongst individuals who seek financial freedom. It allows you to put in effort upfront but earn from those efforts for years. Passive income works by doing a job today and earning money from it in the future. If you mow three lawns then you will earn money from those three lawns. You wouldn’t earn money from six lawns or any money in the future. Expenditure authority not specifically scheduled for expenditure, but expected to be allotted at a later time.

Accountants can also use ROI to compare the efficiency of more than one investment. To calculate ROI, subtract the cost of investment from the current value of investment, and divide that by the cost of the investment. A popular metric, ROI helps investors choose the best investment opportunities. Receipts are written notices acknowledging that one party received something of value from another. An acknowledgement of ownership, receipts are proof of a financial transaction.

Credit Score

Accounting liquidity measures how easily someone can pay for things using liquid assets. Market liquidity refers to how easily a market facilitates the transparent buying and selling of assets at stable prices. Accountants recognize accrued expenses when companies incur them, not when companies pay for them. Primarily necessary and unavoidable, businesses incur operating expenses , like rent, marketing, and payroll, through their normal operations. Closing the books is simple for organizations using cash basis accounting, but it’s more complicated for those employing accrual basis accounting.

Each turnkey company does this process differently, with some requiring you to do more or less effort to get to the point of renting. As in, one company may simply find you properties, while other will get it rent-ready. This is a popular method of rental investing because you can avoid paying capital gains taxes on the sale of the property, but you need to have lived in the home for 2 of the previous 5 years. A credit report is referenced by banks and credit card companies to determine a person’s history of payments, loans, and credit cards. Inflation is the rise of the prices of goods and services over a period of time. For example, you may belong to Netflix, which has a set monthly fee. Your home mortgage, gym membership, or car payments are considered fixed expenses as well.