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Canada (162,366)
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FIN 502 (69)
Chapter 4

CHAPTER 4 measuring and controlling personal finances.docx

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Course Code
FIN 502
Steve Joyce

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FIN502 Personal Financial Planning CHAPTER 4 measuring and controlling personal financesACCOUNTING AND PERSONAL FINANCEPlanning and personal finance is nothing more than managing family financesNo such thing a generally accepted accounting principles for personal financial statementsArticulation that is necessary for a business balance sheet and income statement is not critical in personal finance o Articulation income statement items are linked directly to the balance sheet and the net worth amount or retained earnings on a business balance sheet is exactly the sum of all previous incomes minus dividends paidDeal with cash rather than accrual incomeHOW MUCH IS THE FAMILY WORTHBalance sheet or statement of net worth photograph of the familys financial standing at a point in time o Summarizes major assets and liabilities with balancing figure being the net worthBalance sheet is essential for two reasons 1 Provides benchmark or measure of process in meeting goals 2 Listing and valuation of assets shows what you have to manage Group assets into three categories i Financial assets provide income or are part of what you will consume in retirementImportant in determining progress towards financial goalsValued at market value because we want to know how much we can consume by cashing them in transactions costs liquidated about 2 of market valueEX Cash deposits in financial institution RSP
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