(ThyBlackMan.com) Accounting reports help you see your income, assets, spending, liabilities and a lot more so you can easily analyze and filter the most important factors that affect your budget. Reports work as a reminder and also motivate people to do better. Reports show them a clear picture of their financial condition of past, present, and future. If you are serious about money management, here are the five most important accounting reports that you should always check.
- Net worth Report
Create your personal balance sheet and calculate your personal net worth because it is the best way to know how you can start planning a new financial strategy. Your net worth report is your starting point for all your budgeting and money management goals. On a personal balance sheet, you can calculate your net worth easily.
Compare your financial liabilities and financial assets and the difference between them is your net worth. Here asset is what you own and liability is what you owe. Check your net worth report regularly and don’t be discouraged if the net worth is negative at present. Your financial plans will certainly increase your net worth and now, when you know what your personal balance sheet tells you about your financial status, it will be easy for you to develop better plans.
- Status report
One of the most important accounting reports you need to check is the status report. This report usually contains specific information related to the money you currently have and how much amount of that money can be allocated for certain things such as your medical bills, home improvements, food, bills, tuition fee etc.
A status report gives you an overall view of the budget management system that you’re following. The report helps individuals to plan future expenditures. They can plan and determine the amount of money required for funding their goals. Reviewing the old reports can help individuals understand why and how the money is being spent.
- Spending Report
Once you have tracked your expenses for a week, multiply that number by 4 and that is roughly the money you spend in a month. Calculating your expenses in this way only gives you an estimate of the monthly and annual spending, but remember that there are times during the year when you’ll spend less or more money. For more accuracy, it is important for you to focus on the spending report.
If you’re not taking the help of an accountant or a software application, you can still create better reports. Keep a pocket diary with you for a month. Note and track all your expenses in that diary. Also, make sure keeping receipts of your purchases and also record all (even the smallest one) the expenses.
- Income vs. Expense Report
You should always track your income and expenses because it will give you a clear picture of your finances. Keeping your expenses within the limit of available resources is the only way to avoid a financial crisis. Your expenses should not be higher than the money you earn or allocate to the budget
Ideally, you should match your income and expenditure against each other. Many companies do this quarterly or yearly, but for personal money management, you should check these reports at least once in a month. By checking the income vs. expense report, you can easily control your spending habits and if you have more money in hand, you can invest it or you can use it to pay your credit card bills on time.
- Budget vs Actual
Creating a report that highlights your budget vs. actual financial condition can help you alter the future investments. You can identify opportunities to improve your budget and you can also accurately monitor how your budget plans are working. Through proper planning and controlling, you can not only improve the budgeting process, but you can also get a clear picture of how disciplined you have been throughout a month or the year.
Always focus on the factors that affect your budget plans in any way. There will be some temporary adjustments which may affect your plans for a short period of time, tracking reports regularly will help you in the long run. You will gain more experience and knowledge which will help you keep your budget on track.
Staff Writer; Jay Brown
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