FIN 502 Chapter Notes - Chapter 4: Resource Depletion, Cash Flow Statement, Historical Cost

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2 Jul 2013
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Reason to prepare personal financial statements is for managing the family finances. No such thing as generally accepted accounting principles for personal financial statements: prepare them in a way that works for you. Articulation that is necessary for business balance sheet and income statement isn"t critical in personal finance. Articulation- income statement items all link directly to the balance sheet: net worth amount is exactly the sum of all the previous incomes minus dividends paid. Deal in cash rather than accrual income. What assets do we include: financial assets- provide income or are part of what you will consume in retirement. Resources that determine progress toward financial goals: personal use assets- are the ones you uses everyday life. Personal goal have appropriate accumulation of personal use assets. Don"t yield income, provide consumption: luxury assets- also for personal use, but they are very marginal to the families needs. Depends on what the family considers necessary.

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