Making a Budget
Part 3: One Last Thing A company will also keep a budget in order to see whether spending money on things like advertising is a good idea. Take a look at the graphic below. It is the same as the one above, with one important addition: It has a line for advertising. It also has a different number for sales income on March 31. 3-24
$400
3-25
$400
3-26
$400
3-27
$600
3-28
$800
3-29
$800
3-30
$1500
3-31
Advertising $500
$2500
3-31
Salaries $3,000
3-31
Rent $1,200
3-31
Electricity $800
3-31
Insurance $950
Total
$6,450
$7,400
For all of these reasons, keeping a budget keeps you aware of how much money you have, whether it's $20 or $20,000. Companies do it, and you can do it, too. First page > Budget Basics > Page 1, 2, 3 |
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So
the company spent $500
on advertising in March and got an extra $1,000 in sales
income. It is not always the case, but you can probably say
that the increase in sales came about because of the
company's advertising. Maybe they advertised a toy sale or
the arrival of a hot new product. Either way, they took in
more money than they spent. And company managers will look
at this budget and decide whether to advertise again, based
on how much money they make or lose. (Of course, the only
real way to know if it really was the advertising alone that
resulted in the increase in sales is to try again the next
month. If the other expenses are the same and the income is
lower, then the advertising in March probably led directly
to the increase in sales in March.)
Social Studies for Kids
copyright 2002–2024
David White