Sunday, October 21, 2012

How to Make a Balance Sheet

How to Make a Balance Sheet
Instructions

1

First you need to list all of your assets. Assets include the cash you have in the bank and the property you own, whether in the form of land, buildings or equipment. Your assets should be categorized into accounts with titles such as Cash, Temporary Investments, Accounts Receivable (money that is owed to you), Real Estate Owned, Automobiles, Furniture and Other Property. These assets are usually broken down into current and long-term assets. Some examples of current assets are the cash you have in your checking or savings accounts and any money that is owed to you. Long-term assets include assets that will be held for longer periods of time such as the cash value of your life insurance, the market value of real estate that you own and the value of your retirement fund.

2

Next you need to list all of your liabilities. Liabilities include the everyday bills that you owe, the mortgage balance on your home and taxes that are due at a later date. Your liabilities should be categorized into accounts with titles such as Current Bills, Real Estate Mortgages, Car Notes, Taxes Owed and Other Liabilities. Liabilities are also usually broken down into current and long-term liabilities. Some examples of current liabilities are your credit card bills, your cell phone bill and your electric bill. Long-term liabilities include obligations that will be paid in the future such as your home mortgage, your car loan and some taxes.

3

Once you have listed all of your assets and liabilities you can calculate your net worth by simply subtracting the total of your liabilities from the total of your assets. This is your net worth. Obviously, you want this number to be as high as possible.

Using a personal balance sheet can help you identify ways to raise your net worth. Having your home re-appraised may allow you to increase your assets, thereby increasing your net worth. Cutting back on your current bills, such as credit card charges for entertainment, or paying down your car loan early will also increase your net worth by reducing your liabilities. Taking the time to put together a personal balance sheet is the best way to plan for future prosperity.

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