Currently I can represent my financial position in the subsequent form:
Financial Position Statement 1
Amount owned by me Things of value owned by me
|
|
Rs.
|
|
Rs.
|
|
Personal loan from friend
|
1,00,000
|
Balance with bank
|
3,50,000
|
|
Own claim or net worth
|
9,00,000
|
Fixed deposits
|
1,50,000
|
|
|
|
Other personal belongings
|
5,00,000
|
|
|
10,00,000
|
|
10,00,000
|
Here then the bank grants me the advance (loan) of Rs. 5,00,000 and I buy the car for Rs.8,00,000. Then after purchase of the car my financial position statement will change as given as:
Financial Position Statement 2
Claims against things of value Things of value owned
Rs. Rs.
Personal loan from friend 1,00,000 Balance with bank 50,000
Mortgage loan from bank 5,00,000 Fixed deposit 1,50,000
Own claim or net worth 9,00,000 Car 8,00,000
Other personal belongings 5,00,000
--------- ------
15,00,000 15,00,000
Currently, as a result of this transaction my worth has raised start at Rs. 10,00,000 to Rs.15,00,000. Though, as there is also an equal raise in claims against my worth in the form of mortgage loan from the bank, my net worth keeps similar.
Things of monetary value possessed through an entity are concerned to as assets. Accountants utilize the term assets to explain things of value measurable in monetary terms.
The amount owed through an entity or individual that represent claims against it or his assets through outsiders are responsibilities. This is the claims of outsiders that are legally enforceable claims against an individual or entity which are termed to as liabilities.
The assets owned through the entity, fewer liabilities or outsider's claims are the net worth. As the net worth signifies the claims of owners in case of an entity, this is considered to as owner's equity.
Currently we can understand about the financial position statement is a summary of the assets,liabilitiesand net worth of a firm at an exact point in time.