Types of Personal Financial Statements – Overview

To get a complete picture of your finances, you need three distinct lenses.

1. Personal Balance Sheet (Snaphot)

• What it shows: Financial Position at a specific point in time (e.g., as on 31st March).
• Equation: Assets = Liabilities + Net Worth.
• Key Question: "If I sold everything I own and paid off all debts today, what would I have left?"
• Use: Measures Wealth accumulation.

2. Income & Expenditure Statement (Video)

• Also called: Cash Flow Statement (Personal).
• What it shows: Flow of money over a period (e.g., Apr 1 to Mar 31).
• Equation: Income - Expenses = Surplus (Savings) or Deficit.
• Key Question: "Did I live within my means this year?"
• Use: Measures Saving capacity.

3. The Budget (Plan)

• What it shows: Future projection of Income/Expense.
• Difference: Balance Sheet/Income Statement are Historical (Past). Budget is Future (Plan).
• Use: Control mechanism. comparing "Actual vs Budget".

Comparison Table

Which one is most important?

All three are connected.

• A good Budget leads to a high Surplus (Income Statement), which increases Assets (Balance Sheet).
• A bad Budget leads to Deficit, which increases Liabilities (Debt) in Balance Sheet.

Summary

• Balance Sheet: Assets vs Liabilities (Wealth).
• Income Statement: Inflow vs Outflow (Savings).
• Budget: Plan vs Actual (Control).
• Interlink: Savings from Income Statement flow into Balance Sheet as Assets.

Quiz Time! 🎯

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