Different Types Of Personal Financial Accounting

Personal Accounting

University of the People Personal Finance 2204 Professor Nathan Rondeau

Personal Accounting

Accounting is the system through which a comprehensive recording, analysing and assessing of financial transactions for an individual or entity occurs. These records are in turn summarized into reports that may be used internally/ personally or externally by interested economic agents (www.ivestopedia.com )

The three products of accounting or bookkeeping procedures that are most useful in personal financial planning are namely income statements, cash flows and balance sheets. An income statement is a statement that summarizes expenses for a certain period against income with the end result being either a net surplus income or deficit.

The third financial product most useful in personal finance is the balance sheet which shows the assets owned by and individual against the debts owed. A balance sheet can be drawn at any given time and will show a current situation as opposed to a specific period. The equation used to determine the balance in a balance sheet is that assets will equal liabilities plus equity. Equity is what’s left off after comparing assets against liabilities i.e. how much an individual owns versus how much they owe. Equity is what an individual owns and is free of debt e.g. a paid up car or mortgage. When equity is negative this essentially means that an individual owes more than they own and this could lead to

One of the ways it does this is by making data collection easier. The advent of technology has brought about the extensive use of hand held devices like tablets and smart phones and with some software installed one can literally capture or enter data on the go. Most software is designed to depict a similar interface to a check book which creates familiarity for the user and most people use check books to record their financial transactions. Once the information is entered, the software will automatically do the posting to the different respective accounts i.e. income, expenses, investments etc. and may be accessed by the click of a button. Gone are the days of the arduous task of manually recording and sorting paperwork. Technology also helps in creating and playing out possible scenarios for example if an individual is considering getting

Personal Accounting a second job, capturing the different incoming scenarios will immediately show net income possibilities or vice versa should expenses be increased.

Financial software also helps with storage solutions. Cloud software makes it possible to store information which can be accessed remotely from anywhere in the world thereby minimizing the risk of losing information.

Sources

Personal Finance (Rachel Siegel and Carol