What exactly is accounting, and how does it assist you in managing your finances? Describe three accounting and bookkeeping procedures products that are most useful in personal financial planning. How could personal financial software assist you in your personal financial decisions?
Keeping track of financial transactions related to a business is called accounting. It doesn’t matter how big the business is: accounting is an important tool for decision-making, planning, and performance measurement (Fernando, 2021).
Accounting helps to maintain timely and accurate records of the financial situation, which can be helpful not only for businesses but also for tracking personal finance. Some basic accounting principles can support you in navigating through your personal finance, and many people even hire professional accountants to get some help with this. These basic principles include:
1) Setting a budget (to avoid spending more, than you have).
2) Determining your bottom line.
3) Cutting back on spending.
4) Saving for a rainy day (and creating an emergency fund) (AA Tax & Accounting, 2018).
The three products of accounting and bookkeeping procedures that are most useful in personal financial planning are the income statement, the cash flow statement, and the balance sheet. They help to see, how much and on what exactly you spent your money; it is not a secret that many of us are extremely surprised when at the end of the month they realize that they have spent much more than they thought (not even speaking about spending not as much as they have planned). The income statement is focused on revenues and expenses for a certain period. In other words, it shows how much you earn and how much you pay for everything. The cash flow statement shows your cash inflows and your cash outflows. Finally, the balance sheet snapshots your overall wealth for a certain period (Morah, 2021).
There are a lot of options if you are looking for personal finance software. It gained popularity due to its ability to help with making more efficient financial decisions, especially when you need to plan how to achieve your long-time financial goals. Such software can also show how far or how close to these goals you are, showing certain numbers and giving hints of where these numbers appear, and how they have been calculated.
It is said that people who keep checking their money from time to time, are wealthier than those who do not. And this is true. Unfortunately, in the modern world, it is too difficult to keep an eye on all your accounts: everyone has at least a couple of bank cards, different payment systems accounts, and so on. For example, in my daily life, I use 2 bank cards, WeChat payments, AliPay payments, and a PayPal account. This makes it extremely difficult to count how much money in fact I have at a certain moment in time, or how much I spend daily (not even thinking about a month!). The personal finance software makes it easier to see your inflows and outflows, and you definitely need to use it if you have several accounts, you want to automate some (or all) of your payments, you need to streamline your budget, and you have specific goals to meet (Porteous, n.d.).W
References
AA Tax & Accounting. (December 12, 2018). Applying Basic Accounting Principles to Managing your Finances. Retrieved from https://www.aatas.biz/applying-basic-accounting-principles-to-managing-your-finances/
Fernando J. (February 18, 2021). Guide to Accounting. Retrieved from https://www.investopedia.com/terms/a/accounting.asp
Morah C. (June 13, 2021). Evaluating Your Personal Financial Statement. Retrieved from https://www.investopedia.com/articles/pf/08/evaluate-personal-financial-statement.asp
Porteous C. (n.d.). How Personal Finance Software Helps You Get More Out of Your Money. Retrieved from https://www.lifehack.org/701589/personal-finance-software