Personal Finance: Accounting

 Introduction

Personal finance involves planning and accounting procedures to make it more effective and successful. In this paper, I will answer the three questions required for this week’s written assignment. First, I will define what is accounting and how it will help us manage our personal finances. Secondly, I will discuss the three products of accounting and bookkeeping procedures that are most useful in personal financial planning and lastly, I will tackle how could personal financial software assist us in our personal financial decisions.

Body/Main topic

a. What is accounting and how does it help you manage your personal finances?

According to Fernando, J. (2023), “Accounting is the process of recording financial transactions pertaining to a business. The accounting process includes summarizing, analyzing, and reporting these transactions to oversight agencies, regulators, and tax collection entities. The financial statements used in accounting are a concise summary of financial transactions over an accounting period, summarizing a company's operations, financial position, and cash flows.” As per definition provided above, accounting will help us organize our personal finances in a accurately as it records all personal financial transactions occurred and will occur in the future. With accounting, we should be able to calculate our assets, income, expenses, liabilities and future financial gain or loss. By documenting or recording all personal financial transactions, we should be able to track everything relevant to our personal finances, for example, if we wanted to buy a car in a span of three years, it is very important that we have a record of how much we spend per month, how much we are earning and what are the expenses that we may consider mandatory for the month to factor it in when we calculate our budgeting.

b. Describe the three products of accounting and bookkeeping procedures that are most useful in personal financial planning.

Personally, I think that the three products of accounting and bookkeeping procedures that I feel are most useful are: Income statement, this is where you measure the amount of earnings you accumulate before and after the expenses you consider paying for the period of time – for instance, monthly. Next will be our cash flow, this is where we measure the transactions we have involving cash. This will help us track our inflows and outflows of cash. Last in the list will be the balance sheet, according to Tamplin, T. (2023), “A balance sheet is a financial statement that shows the relationship between assets, liabilities, and shareholders’ equity of a company at a specific point in time.” This product will help the investors to decide whether or not they will invest in your business based on your assets and the ability to liquidate once the business will sunset.

c. How could personal financial software assist you in your personal financial decisions?

Personal financial software is useful in terms of making judgement based on our personal financial choices. For example, software that helps you track your expenses and provide recommendation. This software will definitely help us come up with better decisions in terms of whether or not you will engage into transactions like bank loans or selling assets for additional capital.

Conclusion:

To conclude, accounting play a crucial role to our personal financial planning and it is very important that we have a better understanding on the processes and standards to ensure that we are aligned to what is globally accepted in terms of accounting or bookkeeping standards.

With the innovation of businesses and technology, it is important that we learn and engage into technologies that will help us with the accounting and planning our future business.

References:

Fernando, J. (2023). Accounting Explained With Brief History and Modern Job Requirements. Investopedia. https://www.investopedia.com/terms/a/accounting.asp

Tamplin, T. (2023). Balance Sheet. Finance Strategist. https://www.financestrategists.com/accounting/financial-statements/balance-sheet/?gclid=CjwKCAjwov6hBhBsEiwAvrvN6Cxkb6Ruhui95lQLf45gaywDPxjsUGEoisdZq-mfsZv0PNZGP8xrFhoCyPwQAvD_BwE

Porteous, C. (2019). How Personal Finance Software Helps You Get More Out of Your Money. Life hack. https://www.lifehack.org/701589/personal-finance-software

Siegel, R. & Yacht, C. (2009). Personal Finance. Retrieved from https://my.uopeople.edu/pluginfile.php/1685189/mod_resource/content/4/Textbook/68053-piy-ch02-01.pdf_161160.pdf