The Personal Income Statement

August 31, 2010 · Posted in Financing 

A personal income statement is a document which details revenues, expenses and profit or loss that a person has obtained a period of time.

Having a personal income statement allows a person to understand and analyze the income, expenditure and profit or loss (difference between revenue and expenditure) has been obtained for a period of time, and based on that analysis, to make decisions (for example, to reduce expenditure in particular item) or financial planning.

Also, a personal income statement allows a person to compare the results achieved in a period, with the results obtained in previous periods, and thus, for example, whether it is meeting its financial goals.

To better understand the concept and the usefulness of a personal income statement, see below how to develop and take advantage of one in three steps:

1. Income Detail

We must first make a list of all revenue that we earned over a period of time (for example, for a month, six months a year, etc..) Regardless of the time they become effective charges, For example, if we sold some assets, we record the sale, even though half of it just go to collect the following month.

Between incomes include: wages, business, investment, etc.

2. Detail costs

After detailed our revenues, we began to detail all expenses we made during the same period equally, regardless of when they are made the payments, for example, if we bought an asset, we record the purchase even though half of it just go to pay the next month.

Among the expenses include: food, education, health, transportation, clothing, recreation, services, interest, etc…

3. Develop personal income statement

Once we have the necessary information, we began to develop our personal income statement (preferably in an Excel spreadsheet).

Gross profit is for the sum of the income, while net profit is the difference between revenues and expenditures, there is no profit when revenues are greater than expenses, and no loss when expenses exceed income.

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