FIN 502 Chapter 4: Chapter 4.docx
Document Summary
There is no such thing as a generally accepted principle for personal finance. The only reason you prepare personal financial statements is for managing the families finances. The articulation that is necessary for a business balance sheet and income statement isn"t critical in personal finance. Ex: value of a house is something you don"t control, plan or consume so it is not considered income, record the increase on the balance sheet. Tend to deal with cash rather than accrual income. Your investment in a university degree creates valuable human capital that increases your future earnings (treat it as an expense for personal planning) Family balance sheet or statement of net worth: a photograph of the family"s financial standing at a point in time. Summarizes the major assets and liabilities, with the balancing figure being the net worth. Defining the family: any group of people (including a single person) who share their wealth, revenues, and expenses.
