Question

Relate the three important financial statements to your own process of personal financial management. What is the equivalent of an income statement and balance sheet to your personal finance?

Answer 1

The three most important financial statements for personal financial management are:

a) Income statement

b) Balance sheet

c) Cash flow statement

a) Income statement:

Using this account an individual can get to know what he's earning and what he's spending over a period of time. it also shows the amount he's saved and how much of tax has been paid over that period of time.

b) Balance sheet:

Balance sheet can be used to find out and analyse the financial position of the person. he can analyse the net worth by evaluating the assets and liabilities he has.

c) Cash flow statement:

A person can assess the cash inflows and outflows over a period time. he can get to know what he's getting in cash and how much he's spending