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Wiley GAAP 2008 by Colorado Steven M. Bragg Englewood, Ralph Nach American Express Tax and Business Inc., Barry J. Epstein

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Concepts, Rules, and Examples

Personal financial statements can be prepared for an individual, jointly for a husband and wife, or collectively for a family.

Personal financial statements consist of

  1. Statement of financial condition—The only required financial statement, the statement of financial condition presents the estimated current values of assets and the estimated current amounts of liabilities. A liability is recognized for estimated income taxes on the difference between the asset and liability amounts set forth in the statement of financial condition and their respective income tax bases. Naturally, the residual amount after deducting the liabilities (including the estimated income tax liability) from the assets is presented as net worth at that date.

  2. Statement of changes in net worth—An optional statement that presents the primary sources of increases and decreases in net worth over a period of time.

  3. Comparative financial statements—The inclusion of a comparison of the current period's financial statements with one or more previous period's financial statements is optional.

The accrual basis, rather than the cash basis of accounting, is used in preparing personal financial statements. The presentation of personal financial statements does not require the classification of assets and liabilities as current and noncurrent. Instead, assets and liabilities are presented in order of liquidity and maturity.

In personal financial statements, assets are presented at their estimated ...

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