Accounting And How Does It Help You Manage Your Personal Finances?
The original development of the accounting system was used as a means to record trade exchanges. Its principles and methods are now the basis of modern accounting practices and are commonly applied in businesses and personal financing.
Whether accounting is used in business or personal financing the results of the transactions of buying, borrowing, investing, etc are tangible records of what your financial situation is at any given period. Based on your summarized statements you will know if you are in a positive or negative situation in relation to your personal financial goals. Thus, you can also use this factual knowledge to make a rational decision in your budgeting and financial strategic plan.
2. Describe the three products of accounting and bookkeeping procedures that are most useful in personal financial planning?
The three products of accounting and bookkeeping procedures that are most useful in personal financial planning are the income statement, the cash flow statement and the balance statement.
Income statement: The income statement summarizes your income and expenses at a particular period. This is a reconciliation of your profit or loss. If you are in a loss situation you must review your cash flow statement and identify factors that can change your income statement to a profitable total.
Cash flow statement: The cash flow statement summarizes actual cash flow at a…