Financial ManagementTOPIC

Jl IKPN Bintaro No 1, Pesanggrahan, Tanah Kusir, Jakarta, Special Capital Region of Jakarta 12330, Indonesia

advantages and disadvantages of budgeting

Net$Income$Not$Cash

Net Income Is Not Cash

Let us consider a simple illustration.

An entrepreneur has an opportunity to take over a fully equipped and furnished restaurant for a rental cost of $4,000 a month. The entrepreneur decides that a cash savings of $20,000 should be sufficient working capital to start the business, after which the cash from sales revenue should keep the business going and allow a withdrawal of $2,500 a month as a salary. Prior to opening, the proprietor’s balance sheet would look like this: