a. What is accounting and how does it help you manage your personal finances?
BusinessDictionary.com (2015) defines accounting as “Practice and body of knowledge concerned primarily with methods for recording transactions, keeping financial records, performing internal audits, reporting and analyzing financial information to the management, and advising on taxation matters.” Same as The AccountingCoach.com (2015) that defines accounting as “the recording of financial transactions plus storing, sorting, retrieving, summarizing, and presenting the information in various reports and analyses”. In these definitions, we can easily extract two interesting points that foster management of personal finance: record and keep financial transactions and perform audits, report and analyze financial information. In summary, I would say accounting is simply the practices and techniques of identifying, processing, recording, presenting and analyzing financial information in order to facilitate a smooth management.
b. Describe the three products of accounting and bookkeeping procedures that are most useful in personal financial planning.
Answer: income statement, Cash flow statement and Balance statement.
i.
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In the case of surplus, the difference can be saved and constitute the wealth while in the case of deficit, one needs to lower the expenditures or borrow some money to stay in the budget. It’s in this case of deficit where the income statement becomes very meaningful. As it gives more detail, one should know on which point one spends more money and decide to lower that expense so that the deficit can be lowered. As sustained by Investopedia.com (2003), an income statement measures one’s financial performance during a determined period of