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