Personal financial statement is a private document that is prepared to disclose all the information regarding the assets and liability of an individual. The document helps a person to approach banks for the financial loans like; auto loan, home loan or credit cards as this document reveals the credit worthiness of a person.
The document it along with Assets and liability includes the personal information of a person as his or her name, address and identification number for future verification needed. The statement also clears the financial state of a person and used as separate independent legal identity.
How personal financial statement it is different from other financial statements?
People maintain profit and loss account to show investors and banks there transaction history for future loans or credit till the time, company does not wind up where as new startups does not have any transaction history to maintain there profit and loss accounts. This is when personal financial statements came into play and help the entrepreneurs to get credit from the investors as they show all the Assets and liability of themselves in in personal financial statements. It is nothing but and document it that helps approach investors are creditors for business credit.
What are the components of personal financial statements?
1. Personal Information
This may include legal name, address, telephone number and identification number like, PAN card number.
2. Balance Sheet
This balance sheet must include all the assets and liabilities of the company he or an entrepreneur. It helps to calculate your net worth by subtracting liabilities from the amount of your assets.
Following are some type of assets;
- Accessible cash- cash in hand.
- Bill of exchange- It includes the amount any individual owe to you.
- Balance of your savings account.
- Value of assets- You should disclose the actual value of your assets that may include real estate property, jewellery or any firearm product.
- Life Insurance- The name of the beneficiary and the value of insurance should be disclosed in personal financial statement.
Following are some liabilities;
- Unpaid taxes- This may include the outstanding taxes.
- Bill of exchange- the amount you owe to the creditor.
- Contingent liabilities- these type of liabilities are different from normal liabilities because you play a role as a guarantor who have to pay the amount when the actual debtor fails to pay the same amount.
- Loans- it may include all types of loans like bank loans, Life Insurance or any mortgage loans.
Other miscellaneous information
While preparing personal financial statement you should disclose your income and the sources of income. It may include your salary income, income from real estate property or any other income.
The personal financial statement should proceed with your signatures after verification of the detail document with information granted.
How can I create my own personal financial statement?
Do this process may need any professional?
As personal financial statement it is the document created to disclose financial health of a person. You must hire an expert or any professional for the completion of task as to avoid any legal issue may arise in future. The three main issues that may arise in future regarding personal financial statement are as follow;
- Dishonesty
The document demands honesty some people lie about their incomes in personal financial statement for accessing high value loans. Honesty may not help you in short term but in long run it will give you great creditworthiness in the market. Banks and other creditors will notice your growth and approve your loans.
- Audits
Sometimes you are lying may lead to who audits because courts order for the enquiry when they have the doubt that personal financial statements have something undisclosed or disclosed you are lying about which may lead tt punishment in terms of penalty and in some cases imprisonment if the doubt is true in fact.
- Mistakes and Typos Errors
Personal financial statements are prepared to allow or approve future credits. Thus, must avoid misspelling, misplacement and typographical errors. You should take time to review the document before filing for the approval of loans. The accuracy of the document that holds value.
Who needs personal financial statements?
As per small business administration’s guidelines, personal financial statement it must be prepared by every proprietor, general partner and limited partner who owns at least 20% or more of the business. Preparing a personal financial statements cannot be an easy task without the templates available. It not only makes the task easier but also ensures that everyone must prepare the document in the same format.
What should be included in personal finances?
Personal finance means handling of your personal expenses and savings. It may include all your expenditures, activities and savings in terms of cash, jewellery or real estate property. Thus, personal finances must include following:
- Cash flow statements
- Multiple insurances
- Retirement plans
- Taxations
- Investments
- Savings
Should I maintain personal finances for business?
Businesses are different from proprietors. Therefore, business have there independent identity and their own on assets and liabilities. When business create enough transaction to prepare profit and loss account there is no need a personal financial statement. What when the business is new and has no historical transactions to show in profit and loss account then the only document that help to pool credit or loans, is personal financial statement which may include all the information main about Assets and liability of the business.
Conclusion
Hope the above information is enough to acknowledge you guys about the detailed document namely, personal financial statement. The key ingredients of the document are included in this article for your kind knowledge. Therefore, you may not be befooled by any thug, expert or any professional. I hope after reading this article you have gathered enough knowledge about personal financial statement that you can support your expert to prepare the document. This may avoid bogus transaction that may be included by your expert without your knowledge. Pursue your financial goals and personal financial statement will help you to pool credit.