Balance Sheet Vs Income Statement Balance Sheet Income Statement And Cash Flow Statement Pdf Balance Sheet Vs Income Statement Vs Cash Flow Statement Personal
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This usually presents less of a challenge than the valuation of assets because most long term assets like loans have explicit terms that spell out exactly how much you owe on them at any given moment in time. How Equity Is Valued Depending upon the type on entity (Corporation S-Corp LLC. etc.) that you use the equity portion of the balance sheet can use different terms but really there are two kinds of equity: capital that you put into the company (stock contributed capital etc.) and the earnings of the company (retained earnings). The capital that you contribute is usually pretty straightforward.
This is particularly true for the second basic dynamic. The largest portion of most people s net worth is the ownership of their home. As you pay down your mortgage the later payments pay a higher percentage against the principal and less on interest. It is a form of reverse compounding. You pay less interest. In addition the compounded increases of property values are very high when you put them in perspective of what you may have paid for your home 20 or 30 years earlier. Some years they may go up as much as you paid for the house when you bought it. An individual has two primary tools for managing personal finances.
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In order to make your statements comply with these rules and to give them an air of authority you will have to hire a Certified Public Accountant or C.P.A. and have them compile review or audit your financial statements. What this means is that the C.P.A. takes your statements and then makes some cosmetic changes in order to present them in the form proscribed by US Generally Accepted Accounting Principles or if appropriate one of a number of alternate forms and then issues an opinion on them. The opinion will vary depending upon the type of engagement you hired them to do. The standard opinion for a compilation is "we took this pile of crap and made it pretty but we re not saying that it makes any sense" while the standard opinion for an audit is "sure we took a look and everything seems OK but please don t sue us if we re wrong!" while a review falls between the two.