Prepare your Balance sheet to know your Net Worth

The Balance sheet as commonly referred as, is the statement of financial position of an individual. The balance sheet presents a person’s financial position at a specified date. The balance sheet is divided into two sides, assets are on the right side and liabilities or obligations are on left side, and shows individual’s financial position and also helps calculating the net worth. The balance sheet outlines the financial and physical resources that an individual has at his disposal at a particular point in time.

When determining the net worth, it is important to include the market value of all assets in the calculation like cash in hand, real estate holdings, stocks and other investments, and major items such as fixed assets, jewellery, and vehicle. Calculating a net worth involves totaling the amount of all debt obligations, and subtracting that figure from the total worth of all assets. When the cumulative value of all the assets exceeds the total of all liabilities, it can be said that a positive net worth exists. A positive net worth means having a greater number of assets as compared to your debt obligations shows that you are comfortably well off. A negative net worth on the other hand will mean that your debts have surpassed your assets.
Net worth is the value of a person’s assets, including cash, minus all liabilities. The amount by which the individual’s assets exceed their liabilities is considered as the net worth of that person. Net worth tells you where you stand financially. It gives you the true picture of what you actually own.

The net worth is the most credible piece of information in any financial plan because you will know about the current financial prospects. Keeping in mind about the present state of finances, it will be easier for you to have an estimate of your future financial needs. On calculating the net worth, you will quickly reach a conclusion about the amount of money that you will require for your impending needs.

Thus, it is of paramount importance for individuals to prepare his balance sheet or the statement of assets and liabilities for each year. This will also help an individual to plan his financial position, capacity to apply for any loans and other vital things. Also, banks asks for copy of balance sheet for sanction of any loan.

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