Personal Financial Statements Chapter 12 Personal Financial Statements The Balance Sheet.

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Presentation transcript:

Personal Financial Statements Chapter 12

Personal Financial Statements The Balance Sheet

Assets are any items of value that you own, including cash, property, personal possessions, and investments. Personal Financial Statements Liabilities are the debts that you owe. i.e. Car loan (A car payment is an expense) Net Worth = What is left over

cash flow The money that actually goes in and out of your wallet and bank accounts is called cash flow. inflow dividends Cash inflow is the money you receive, or your income and earned interest such as dividends. outflow Cash outflow includes all of the money you spend. Income –Expenses = Net Cash Flow Personal Financial Statements Income Statement (The Cash Flow Statement)

Step 1. Record your income. List all of your sources of income during a given month. Personal Financial Statements The Income Statement (Cash Flow Statement) Step 2. Record your expenses. Fixed expenses Fixed expenses: the same each month Variable expenses Variable expenses: change from month to month Step 3. Determine your net cash flow. Subtract your expenses from your income.

Deficit Deficit cash flow – spend more than you make Personal Financial Statements  borrow money, increasing your liabilities, or  draw from your savings, decreasing your assets. Surplus cash flow - Surplus cash flow - make more than you spend  save the money, adding to your assets, or  pay off previous debts, reducing your liabilities.