In accounting, there are four parts that make up the financial statements. The four parts are as follows: Retained Earnings (RE), Income Statement (IS), Balance Sheet (BS), and Statement of Cash Flows (CF). For purposes of this article, I will explain the three main parts of the financial statements that are needed in accounting 201. The three main parts that are needed are the Income Statement, Statement of Retained Earnings, and the Balance Sheet.
In order to begin your Income Statement, you must first include the header. This usually consists of Name of Company, Income Statement, and Dates for which the Income statement is being conducted for. Example: August 31, 2010 – September 30 2010. Next, must create a column for where your “Revenue” accounts can be listed. Then go over a few columns and put “Debit” and “Credit” (each in their own column). Now, you should list all of your Revenue accounts underneath the “Revenue” column. A few examples of revenue accounts are Sales and Revenue Earned. After you have listed all of your revenue accounts, you must then insert into the debit column the amount of each account. Once that is done, you then add all of your revenue accounts to come out with total amount of revenue which is then placed in the credit column. After this is done, you must then skip a space and create a new column of accounts. These accounts will be your “Expenses”. Just as before, you must now list your expenses underneath this heading. Examples of expenses are: supplies expenses, insurance expenses, and miscellaneous expenses. Once again, you must record the amount of your expenses and place them into the correct account in the debit column. After this is done, you then add all of your expenses to come out with your total amount expenses. This number is recorded into the credit column. And now to finish your Income Statement, you take your Total Revenue subtracted from your Total Expenses. This will give you the amount of your Net Income or Total Income. If you have a positive number then you are gaining money (net profit). If you have a negative number, you are losing money (net loss).
Next, you must create your Statement of Retained Earnings. Just as before, you must include your header, which contains the Name of the Company, Statement of Retained Earnings, and the Dates for which it is being calculated. To begin, you must create a column where your Retained Earnings can be listed. Once again, go over a few columns and write “debit” and “credit” (in their own columns). Now you can begin listing your accounts under Retained Earnings. These accounts will be Retained Earnings-August 31, 2010 and Net Income (the amount from September). You must then record the amount of each account into the debit column. Once that is done, you must then add these amounts together to come out with an answer which is placed into the credit column. After you have reached an answer, you must then skip a space and write Dividends into the Retained Earnings column. You must then record the amount for Dividends into the debit column. After that is finished, you then subtract Dividends from the total amount of Retained Earnings-August and Net Income to come out with your final answer for the Retained Earnings-September 2010.
Lastly, you create the Balance Sheet. Again, you must include the header (same as the previous two). To set up the Balance Sheet, you must set it up with Assets on the left, and Liabilities and Owner’s Equity on the right (it is usually easier to have your Owner’s Equity below your Liabilities). It is also important to have a Debit and Credit column for each of these categories (Liabilities and Owner’s Equity will match up if you did the one beneath the other). Now you begin to plug your accounts to where they belong. Example: Cash goes to assets, Accounts payable goes to liability, and Retained earnings goes to owner’s equity. Once that is finished, you then plug the amount of each account into the debit column. After this, we then begin to add all of the accounts together. The asset column adds all of the assets together and subtracts the amount of depreciation used on those assets to give you the Total amount of Assets. The liabilities are added together to give you the Total amount of Liabilities, and the Owner’s Equity is added together to give you the Total amount of Owner’s Equity. Once that is done, you must then add your Total Liabilities plus your Total Owner’s Equity in order to balance the amount with your Total Assets.
This great question has been asked many times. There are several answers to this question. In this article I will focus on only one area of why it takes longer to get a farm loan than to finance a new vehicle.
This one reason is TITLE!
When you apply for a farm loan the lender will want a title insurance policy to insure their loan is valid and in first lien position. This process usually starts with the farm loan lender calling a title company and requesting a title commitment. A title commitment will show several things: current ownership, any mortgages or deeds of trust owed against the real estate, any judgments or liens against the current owners and most important any cloud on title.
The title commitment can take anywhere from a day to two weeks to complete. A large number of the commitments on any real estate transactions will have problems! This list of problems can include: judgments/liens against the owner, a neighbor had a typo on his deed or mortgage that was filed on your property, the road you are using to get into the property is not really a public road.
Because of all of these problems you could have to hire an attorney to fix these problems and this takes a couple of weeks. So now because of the time it took to get the title commitment and the time it took to get the title fixed you are looking at 4 weeks.
On an auto title you simply sign the back of the title and take to your local tag agent. Your lender attaches a lien on the vehicle and in less than half a day you have your new pickup and loan.
Now I know the questions you are asking: So why not do the same type of transaction with real estate titles???
First Reason: Remember what I said above about the large number of real estate title problems. Farm loan lenders know this fact and want to make sure at the time of the loan all problems are cleared. How many car titles have problems? Other than a lien against the vehicle there are no problems.
This brings up the second reason. The only document that can be filed against a car title is a lien. The list of what can be filed against the real estate title is a mile long from deeds, mortgages, liens, leases, assignments, affidavits, financing statements, releases, power of attorneys, trusts, decrees and the list goes on and on.
All of these possible filings make the title more complex. This in turn causes more time to be spent by a real estate expert to determine how all of these documents affect title to the real estate. Also, the large number of these filings guarantee there will be more problems with wrong names, dates, notaries, typos and legal descriptions.
When considering personal finance budgets, most people will only consider making cutbacks when the money begins to run out, and only then will they think about creating a home budget worksheet, or a personal finance worksheet. The more proactive will have done this well before they get that far, some will even investigate personal finance online, and a proportion of those who do will find that their search leads them to some personal finance online software.
This behaviour though, is in itself not a financial planning definition, and there are seven things that people just don’t think about when completing a personal finance spreadsheet.
1. Shelter Provision – Why People Don’t Switch
Switching means to change service provider either because the service being received is no longer satisfactory, or because it can save money. Yet despite these obvious benefits of better service and financial savings, most people don’t switch.They don’t switch bank accounts because they believe there is a disadvantage to moving from ‘people who know me’. They don’t switch utility providers because they think it’s ‘too much hassle’. The REAL reason why people don’t switch though is apathy. Most people just can’t be bothered.
2. Shelter Provision – Overcoming Apathy
There is a psychological effect known as “bystander behaviour” when people in crowds fail to take any action when they witness a crime or accident together- each believing another will be the one to act. People don’t want to overreact or be embarrassed.
Other studies on apathy showed that people experience apathy when things just don’t affect them, they have a visible lack of emotion or drive. The second secret of switching is to understand that overcoming apathy is easy and possible, and that holding back is damaging the personal finance statement!
3. Shelter Provision – Motivation
Often, Apathy and it’s cousin, procrastination, come from a lack of motivation, which simply means that people either don’t have any goals, or don’t have the right goals.
People in this situation have simply forgotten what they want, their activities just don’t fill them with enough enthusiasm- and this can be traced right back to the lack of goals setting with students, or goals setting templates taught to us at an early age.
Financial goal setting is a powerful way to overcome this apathy – and switching is an instant way to achieve quick savings within a personal finance budget.
4. Shelter Provision – Budget Target
Budgeting can be one of those things that people put off, because it doesn’t necessarily bring pleasure. Yet the whole point of a goal is to connect you to something you want. Saving money releases funds to do exactly that. Often, it is possible to save hundreds just from switching – so set a target from all the possible routine and regular outgoings.
5. Shelter Provision – Prioritise the Prize
It makes sense that one you look at your family budget worksheet, you target the biggest spend items first, and shop around to switch. Some won’t be possible until contracted dates, such as mobile phones or special utility deals, but if you start with the largest first, and then work down the list, you will understand the value of the biggest prize for the least effort.
6. Shelter Provision – The Power They Have
Most service providers are big companies who don’t really know you at all. We think their power is the ability to restrict services – that the bank won’t lend us the money we need because we only just joined them.
We pay Utility bills quickly or on time because they have whole departments of people dedicated to chasing us for money when we don’t and in extreme circumstances we have all heard the tragic stories about people dying because they lost electricity, gas, or water supplies.
We think that they have more power than they actually have. We think that because they are so huge and powerful, that they have all the power – that we have no individual significance to them.
7. Shelter Provision – The Power You Have
Actually, you have much more power than you think. The competition among mobile phone providers, power companies, and in fact every supplier to your home is a very good thing for personal finance budgets.
These organisations now have customer retention departments who try their best to keep you. Savvy customers are very valuable and customer retention departments will offer all sorts of ‘deals’ to keep your business because of the lifetime value of your custom, and the high costs to them of replacing you with someone else. You actually hold ALL the power, because you get to choose who gets your custom.
One of the main characteristics of wealthy people is that they have confidence in their ability to make decisions, in their purpose, and in their personal finance budget. Confidence, self confidence specifically, is a learnable skill, and to become strong in confidence is to understand how to place the mind in the right state. With mind and money aligned, wealthy people are much happier than those who only chase money as an end goal.
Confidence: The Four States of Thought
Autopilot Thinking is when people are over familiar with routine decisions, and can quickly form assumptions about what is expected – like when using credit cards in the store, or driving home along a well known route. This is an external thinking state and can be harmful. Another harmful state is the internal, critical voice, which so often tells people that they are an imposter – that they “can’t do” or “aren’t good enough”
There are two helpful thinking states which balance this – the internal voice is the thinking state where the mind assesses options, while the external helpful state is the engaged state, where the mind is concentrating on solving problems.
The objective in managing money, in assessing the personal finance statement, and especially if financial planning has been ignored and money is a problem, is to move from a harmful state to a helpful state, by working out where all the money goes, balanced against when it all comes in. Reflecting and evaluating alternative choices brings confidence back into the personal finance budget process.
Confidence: Why Negative People are so Destructive
Negative people are destructive because they can suck out the enjoyment of life from all the people around them. These people suffer from afflictive emotions, they become jealous, angry, fearful. They are critical, condescending and demeaning. These people are the opposite of what they seem because they are not at all confident, and project their toxicity as a protection against being touched by the people around them.
In seeking to build confidence as a skill, these people need to be avoided, or managed because they will do everything to precipitate doubt in those around them
Confidence: Strategies to overcome Doubt
The secrets to overcoming doubt, are to become confident in taking action and making decisions with personal finance. By moving away from self consciousness, by deliberately tuning out, focussing on something else, concentrating on financial goal setting, budgeting and forecasting, people can grow confidence because they can see a future to pursue, which takes attention away from self – building confidence.
Another way to overcome doubt is to picture the situation as a movie in the mind. Then make it black and white, then dim the picture before finally moving backwards as if leaving a cinema, so the image gets smaller and distant. Finally, positive thought and positive action both dispel doubts – so doing something active, and surrounding yourself with positive people works too.
Confidence: The difference between a Public victory and a Private victory.
In growing the skill of confidence, it is necessary to experience both private victories and public victories. Private victories are where outcomes are focussed on the personal results of being proactive, thinking about the end game before starting, and then choosing the first steps to take. In matters of personal finance planning, it is important to work with a personal finance spreadsheet, or a family budget worksheet.
Better still to subscribe to a personal finance budget software, preferably online for ease of use. The outcome is to be clear and precise about the budget decisions to be taken. Public victories are where attention turns to the outside world, where it is important to see the win for both sides, to understand first the consequences of spending money, and then to involve the family or those around you in a team effort to curtail wasteful spending.
Personal finance online software allows for this behavioural victory, the growth of confidence in managing money and in forming new personal finance budgets.