Financial Statements Measure Your Financial Health and Progress.
Financial statements are compilations of personal financial data that describe an individual’s or family’s current financial condition. They present a summary of assets and liabilities as well as income and spending of an individual or family. The two most useful statements are the balance sheet and the cash-flow statement.
A balance sheet (or net worth statement) describes an individual’s or family’s financial condition on a specified date (often January 1) by showing assets, liabilities, and net worth. It provides a current status report and includes information on what you own, what you owe, and what the net result would be if you paid off all of your debts. It answers the question “Where are you financially right now?”
A cash-flow statement (or income and expense statement) lists and summarizes income and expense transactions that have taken place over a specific period of time, such as a month or a year. It tells you where your money came from and where it went. It answers the question “Where did your money go?”.