Accounting Analysis

Accounting Analysis

The income statement measures the income and expenses of a company over a specific period of time.  Reflecting on your personal financial statement for the past month, can you apply the principles of the income statement?  What did you learn from this experience?

When I look at my personal financial statement I found that it also depicts the income and expenses for the month of December 2013. When I compared my personal statement with that of a company I found that for a company the difference between income and expenses is a profit and for me it is the amount saved. Though the company also uses its profit as retained earning but it can also distribute the profit among its shareholders in the form of dividends too. I experienced that making a personal financial statement will help me to find out what are my major expenses and I can plan my activities of future on the basis of that financial statement. Another thing that I learned from this activity is that the savings can be increase by either lowering the expenses or increasing the income. Income statement is trustworthy in the case of a company and an individual as well. Every person should make his or her personal income statement for each month as it will help him / her to analyze his / her financial position and it will also help to plan for the future.

Let us now discuss the impact of financial statement and personal statement of expenses and income in detail. Consider I am not working anywhere but I do have skills which are required to do certain work like writing skills, presentation skills and graphics designing skills. My income is the pocket money which I get from my home by my dad. In my personal statement in the column of income I will add the amount which I get from my dad say $600. Now I will see to the expenses which occur in my daily routine. These expenses include the recreational expenses in the form of tickets of cinema, food, drink and party tickets. Other expenses include the travelling expense which I have to pay on daily basis while I travel in train or bus. The major expense which occurs in my life is the expenditure which is done on the buying of stationary, books, copies and the fees which I pay to my school. Now I will sum all the expenses which occur in the month of December and then I will deduct it from the only income that is my pocket money. Let us say that my expenses on entertainment exceed all other expenses. The personal statement of income and expenses will tell me that my entertainment expenses are increasing and I am spending a greater amount of my income on entertainment. This will help me to realize that in future if I keep on increasing my expenses it can result in debt. Therefore, from the next month I will try to control ...