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Canada (162,168)
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FIN 502 (69)
Chapter 4

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FIN 502
Steve Joyce

thChapter 4 Measuring and Controlling Personal FinancesJan 24 2012There is no such thing as a generally accepted principle for personal financeThe only reason you prepare personal financial statements is for managing the families financesThe articulation that is necessary for a business balance sheet and income statement isnt critical in personal financeArticulation means that the income statement items all link directly to the balance sheet and the net worth amount or retained earnings on a business balance sheet is exactly the sum of all the previous incomes minus dividends paidEx value of a house is something you dont control plan or consume so it is not considered income record the increase on the balance sheetTend to deal with cash rather than accrual incomeYour investment in a university degree creates valuable human capital that increases your future earnings Treat it as an expense for personal planningHow much is the Family WorthFamily balance sheet or statement of net worth a photograph of the familys financial standing at a point in timeSummarizes the major assets and liabilities with the balancing figure being the net worthBalance sheet essential for two reasons 1 Provides a benchmark or measure of progress in meeting the familys goals o Type of asset you have acquired relative to your goals and your net worth are the most relevant items 2 Listing and Valuation of assets shows what you have to manageDefining the Family any group of people including a single person
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