Chapter 1
Financial Statements: Personal Accounting
4
Note that net worth is
equal to assets minus
liabilities. We will discuss
this relationship later in
the chapter.
In Figure 1.4, despite
the fact that your cash
balance is lower, your net
worth is higher.
In Figure 1.5, you have a
negative bank balance,
meaning that you have a
bank overdraft. However,
your net worth is signifi-
cantly higher than in
Figures 1.3 and 1.4.
Note that in accounting,
negative numbers are
expressed in parentheses.
For example, –$2,000 is
shown as ($2,000).
In Figure 1.6, you have
a large amount of cash,
a valuable home and an
expensive car. However,
your net worth is lower
than the previous three
scenarios. This is because
you borrowed a large
amount from the bank
for your house and car.
The net worth reflected
in Figure 1.5 (with the
negative cash balance) is
actually greater than that
in the other figures.
Personal Balance Sheet
As at December 31, 2016
Assets
Liabilities
Cash
$1,000 Unpaid Accounts
$5,000
Investments
18,000 Mortgage
100,000
Contents of Home
4,500
Automobile
10,000
Total Liabilities
105,000
House
120,000
Net Worth
48,500
Total Assets
$153,500 Total Liabilities +
Net Worth
$153,500
FIGURE 1.4
Personal Balance Sheet
As at December 31, 2016
Assets
Liabilities
Cash
($2,000) Unpaid Accounts
$10,000
Investments
30,000 Mortgage
80,000
Contents of Home
5,000 Bank Loan
7,000
Automobile
10,000 Car Loan
6,000
House
180,000
Total Liabilities
103,000
Net Worth
120,000
Total Assets
$223,000 Total Liabilities +
Net Worth
$223,000
FIGURE 1.5
Personal Balance Sheet
As at December 31, 2016
Assets
Liabilities
Cash
$50,000 Unpaid Accounts
$15,000
Investments
8,000 Mortgage
220,000
Contents of Home
12,000 Bank Loan
60,000
Automobile
50,000 Car Loan
40,000
House
250,000
Total Liabilities
335,000
Net Worth
35,000
Total Assets
$370,000 Total Liabilities +
Net Worth
$370,000
FIGURE 1.6
