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How To Write A Personal Financial Statement

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A personal financial statement describes a person or couple’s financial assets and liabilities. An asset is any monetary or non-monetary item that a person owns and the value of it can be estimated by either sales price or cash value. Liabilities, on the other hand, are any monetary obligation that a person has to pay such as rent or mortgages. Usually, liabilities are behind the payments of assets, although the value of assets may be higher than liabilities.

A personal financial statement normally lists all assets and debts of an individual. Such an inventory provides the basis for computing the individual’s net worth or income. A positive net worth indicates more income than liabilities, while a negative net worth indicates loss of potential income. Net worth allows a person to determine if their current lifestyle is suitable for investment or savings. A financial advisor may use a personal balance sheet and other tools to help an investor come up with a suitable plan.

The assets and liabilities listed in the personal financial statement allow an investor to calculate potential tax liabilities. An accountant will review the information in the balance sheet to determine the tax implications of making different arrangements with his or her individual assets. An investor should have his or her personal guarantee, which is legally protected, in place with his or her business. This protects the business owner from losing money through inability to pay an obligation listed on the personal guarantee. This protection also gives legal recourse to recover lost monies if the business fails and the owner loses control of the business.

Personal financial statements also list the investor’s personal health, including medical and dental expenses. These records are used for the purpose of evaluating an investor’s ability to meet his or her obligations. They help investors assess their own financial health, as well as that of their family, friends, and employees. These records will also reveal any significant discrepancies between the income statements and personal financial statements, such as discrepancies that reflect an unusual pattern of financial health or an unreasonable increase or decrease in expenses. Investors should investigate any unusual patterns before they provide substantial funding to a start-up business.

The contents of the personal financial statements include the following: current and last year’s income, current and previous year’s balance sheet, current and forecasted net worth, current income and balance sheet data for each partner, and property, plant, and equipment accounts. All financial reports must be prepared in accordance with the Generally Accepted Accounting Principles (GAAP). Once these reports are prepared, they are distributed to the company’s senior management for reviewing and approval.

The current and forecasted net income statement reports the income that will be generated through the normal operations of the business over the course of one year. The monthly income statement reports the income that will be generated through monthly operations through each month of the year. Both statements are required to cover general ledger, current and forecasted expenses, and financing. The personal financial statement requires certain information regarding the following items: the gross revenue, the inventory, the cost of goods sold, the selling prices of products, and the remaining unpaid debt of the company. This information is necessary for calculating taxes.

In addition to the personal financial statement, you will also need a personal loans and balance sheet report. The personal loans report lists the outstanding loans, the current and previous balances on each of the loans, and the monthly payments. The personal balance sheet reports the following: the equity, outstanding short-term loans, and current and forecasted liabilities as a percentage of total assets. Both reports are required to cover general ledger. You can obtain a free personal loans and balance sheet template from the Annual Guide to Building Financial Portfolios.

Now that you have completed your financial statements, you can determine if you have reached a new level of personal financial security. If your personal balance sheet and personal financial statements show that you have reached a significant change in your asset or liability position, you may want to consider taking out more loans and equity to finance growth. Or, you may want to sell some assets to raise money for funding. Or, perhaps, the best action would be to invest in education or start a business. Regardless of your personal choice, the most important thing is to remember to monitor your finances closely so that you don’t find yourself in a financial crisis.

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