What Is a Personal Financial Statement?

To an individual, a personal financial statement is much the same as a balance sheet to a company or a portfolio to an investor. It provides visual information about the financial health of a person within a certain time.

Identification

A personal financial statement is a balance sheet showing what a person owns and what she owes. It's a summary of net worth (assets minus liabilities).

Function

The function of a personal financial statement is to provide visual evidence of assets and liabilities. These statements also act as proof to a person's net worth and credibility in financial negotiations.

Features

A personal financial statement provides a concise, itemized listing of any relevant personal financial information. It also gives a practical outline to show a person's financial stability to a lender.

Use

A financial lender uses a personal financial statement to verify cause to approve or disapprove a loan application. Personal financial statements are also used to help evaluate budget needs and any future financial problems.

Significance

Personal financial statements act as solid proof to financial lenders of the individual's ability to repay financing. Financial statements also provide verifiable proof of a person's possessions and whether he is in danger of defaulting.

References

• Investopedia.com - Personal Financial Statement
• Inc.com Article