One of the best ways to learn about financial statements is to prepare them. Put together your personal balance sheet and income statement, You will have to adjust the account categories to fit your needs. Here are some suggestions:

Current assetscash on hand, balances in savings and checking accounts

Investmentsstocks and bonds, retirement funds

Fixed assetsreal estate, personal property (cars, furniture, jewelry, etc.)

Current liabilitiescharge-card balances, loan payments due in one year

Long-term liabilitiesauto loan balance, mortgage on real estate, other loan balances that will not come due until after one year

Incomeemployment income, investment income (interest, dividends)

Expenseshousing, utilities, food, transportation, medical, clothing, insurance, loan payments, taxes, personal care, recreation and entertainment, and miscellaneous expenses

After you complete your personal financial statements, use them to see how well you are managing your finances. Consider the following questions:

a. Should you be concerned about your debt ratio?

b. Would a potential creditor conclude that it is safe or risky to lend you money?

c. If you were a company, would people want to invest in you? Why or why not? What could you do to improve your financial condition? (Information)