Overview
Continuing in Chapter 2 on balance sheets and income and expense statements, it is now time to prepare your own basic Income And Expense Statement. If you're doing this for the first time, as you have already discovered, it may not be as easy as it sounds! Use the following questions to help you along as well as Worksheet 2.2 in your textbook:
- Have you included all items of income on your income and expense statement? (Remember, your paycheck is income)
- Have you included all debt payments as expenses on your income and expense statement? (Your phone bill is an expense for this month if you've already paid it)
- Are there occasional expenses that you've forgotten about, or hidden expenses such as entertainment that you have overlooked? Look back through your checkbook, spending diary, or any other financial records to find these occasional or infrequent expenses.
- Remember: Items go on either the balance sheet or the income and expense statement, but not on both. For example, the $350 car payment you made this month is an expense on your income and expense statement. The remaining $15,000 balance on your car loan is a liability on your balance sheet, while the fair market value of your car at $17,500 is an asset.
After completing your Income And Expense Statement, subtract your total expenses from your total income to get the cash surplus (a positive number) or deficit (a negative number). Now, make sure this surplus or deficit is located at the bottom of your statement in order to display your financial condition.
For the purposes of discussion, please keep your personal financial numbers private.
Do you like where you are? If not, how can you get where you want to be? Use your financial statement to help you formulate plans for the future. Let's Discuss.
Using your results, share a 150 word reply discussing the following:
- Specifically why you like (or don't like) where you are
- What you definitively need to do to get where you want to be.