Written Assignment 2

1 University of the People Course. Bus 2204-01 - Personal Finance Written Assignment 2. Submitted by. Course Professor. Dr. Nirosha Sovis
2 What is accounting and how does it help you manage your personal finances? Accounting : It is the recording of financial statements pertaining to a business (Fernando, 2023). It is the act of recording keeping, analysing, summarizing, and reporting financial operations and data for businesses, organisations, associations, governments, or individuals. Accounting is significant in personal finance because it helps individuals track, manage, and plan personal income and expenses. Accounting can be recorded in accrual or cash format recorded in journals, ledgers, etc (Siegel & Yacht, 2009, p. 42). Account significance in personal finances includes: Budgeting : accounting helps us to record, analyse, and plan personal budgets such as income and expenses based on the monetary value a person has. It will guide personal informed decisions on resource allocation, savings, and investing. Personal Goal Setting . Accounting presents a support system to plan, track, and report personal financial goals. Such as saving for a mortgage, university education, retirement, etc. Informed Decision : Accounting knowledge can help an individual to have a personal plan and decision on what to invest in such as bonds, stock, and properties, based on their viability to return profit on investment. Tax Planning : knowing accounting helps to plan our income and expenses which is useful for annual tax filing and other personal audits related to taxation. Describe the three products of accounting and bookkeeping procedures that are most useful in personal financial planning:
3 Income Statements (Profit and Loss Account Statements) : It is a financial statement that carries the profit and loss statement of a business within a period of time usually a year. This statement is useful to see where to cut costs and if a business is making a profit or not. If the income is greater than expenses, there is a surplus, and it means the company is doing well. If the income is lower than expenses, there is a deficit and the company is going through financial challenges (Siegel & Yacht, 2009, p. 42). Balance Sheet : It is a financial summary that shows what you have and what you owe (Siegel & Yacht, 2009, p. 46). It is a snapshot of the financial position of a company within a specific period of time. It depicts the asset, liability, and owner's equity of the firm. The balance sheet can reveal the network of a company and its financial health. The formula is assets = liabilities + equity (Siegel & Yacht, 2009, p. 42). Cash Flow Statement : It shows cash movement in and out of the firm. it is a statement that "shows how much cash came in and where it came from, and how much cash went out and where it went over a period of time (Siegel & Yacht, 2009, p. 42). The cash movement is in these categories into operating activities, investing activities, and financing activities. Tracking cash flow ensures that there is money available to run the business operating costs. How could personal financial software assist you in your personal financial decisions? Personal finance software offers ease and a digital process for collecting, classifying, sorting, reporting, and securing financial data to evaluate a personal or business situation (Siegel & Yacht, 2009, p. 64). Personal financial software is also known as personal finance management (PFM) software or budgeting apps. Some of the benefits of Personal finance software include:
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