would you like to know your net worth and all the numbers that lead up to the net worth calculation
well now that we've finished learning about an individual profit and loss
we will now learn about individual personal balance sheet
if you have any questions about this topic you can leave them in the comments section below
and i'll do my best to help you and of course if you feel the video helped you i hope you will
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a person trust or estate can have a balance sheet a balance sheet
shows the financial position of the entity as of a specific moment in time
it shows the net worth or the real worth of the person trust or estate
so is that the same thing as total assets well it could be but the truth is your net worth is
reduced by the liabilities you have that means the money that you owe at the moment that you're
measuring your net worth so if you know your total assets and you subtract out your liabilities
then you will know your total net worth seems like a pretty easy calculation but then the question is
do you really know the value of your liabilities and the answer is yes every
time you take a loan or owe money to a financial institution in one way or another
there will always be a monthly statement or some kind of document or set of documents that tells
you all the information about the money you owe it will tell you how much the original debt was
how much each payment was and what the debt is at the moment that you're making the balance sheet
so if you know your assets then you can calculate your net worth by subtracting your liabilities
but then the question is how do you really measure the value of your assets once you know your assets
you could just subtract the liabilities that you know and you know your net worth and finding the
value of your assets is a whole nother topic that will be shown in the videos that follow this one
this video we're focusing on net worth and then the question is where on the balance sheet
would the net worth be well the answer is the net worth will show in the owner's
equity section of the balance sheet of the person or entity that you're making the balance sheet for
you see if this were a business the equity would represent the equity on the balance sheet that is
would represent the amount of ownership claim or ownership rights that the owner
has in the business but if you're talking about a personal individual balance sheet
the equity of a business is analogous to or similar to the idea of the personal net worth
so that's why if you're using quickbooks to find your net worth it would be in the owner's equity
section of the balance sheet however to make it clear that this is the balance sheet of a person
or a trust or an estate you should change the name of the equity accounts
to net worth so that it's clear that this balance sheet is for a person so then the question is
what equity accounts are already in your chart of accounts now and the answer is that depends
did you make your quickbooks file for home finance setup if you did and you were following
the original videos in this video series that means in order to make the file for personal home
finance when you were asked to select an industry you were instructed to choose
other none and part of the file creation process you were asked to select a company type and you
were instructed to put other none and if you did that in both cases when you created the file
that means that you have the minimum amount of owner's equity accounts but if you did
not do that while you were creating the file you would have to open the company main menu
then open the my company window then click the pencil tool to get the company information window
then click report information and change it to other none so that you can have the minimum
number of equity accounts and let me show you what i mean if you did not answer the questions
correctly when you created the file you would click company my company and of course you'd
be able to click the pencil tool to change your address and so forth and all the information that
prints on the forms and reports but if you click the pencil tool and you click report information
you can change which tax form this particular quickbooks file will import into so if you chose
other none you should only have these two equity accounts the minimum number of equity
accounts that you can have when setting up if not you will have to edit your chart of accounts
to have just these two after you changed it in the my company window that i showed a moment ago but
these two names of the two equity accounts are not really appropriate for individuals now remember
dealing with equity accounts can be complex and you would have to know some accounting ideas
in this course we're going to set up the equity accounts in the most basic way that
satisfies the conditions that we need if it needs changing the accountant will change it
because if it's an estate or a trust someone with experience with estates and trusts will know how
to change the names of the equity accounts as well as add or remove any equity account
so let's change the names and make them more relevant for an individual balance sheet let's
change the name of opening balance equity and retained earnings to make them more understandable
if it's the balance sheet of a person let's change the name of opening balance equity to
original net worth and let's change the name of retained earnings to net worth
from income and that's all we have to do and the balance sheet will be more understandable
list chart of accounts click on opening balance equity account edit original net worth
and that's the net worth before you started using quickbooks now retained earnings account edit
net worth from income
and that's the net worth that you added after you started using quickbooks now
if you open up a balance sheet we click reports company and financial
balance sheet standard now if you scroll down to the equity section you can see
open it up you can see that we only see net worth from income in our example that's because
the original net worth was not put in we did not put in the value of the assets on the day that we
started doing quickbooks for our home finance but if we did the assets would be listed up here
and the balancing entry would be the original net worth down here and in the videos that follow
we will learn how to put in the original assets that we had when we started using quickbooks you
see original net worth is equal to the value of the assets minus the liabilities at the moment we
started using quickbooks and we would normally put them in the only problem is i chose to save assets
to the end of the course so what you see in the following videos might be done at the beginning
to give you your original net worth and your net worth from income simply means that after
you started using quickbooks all of the prior year's net income will show in that one number
accumulated net income and that's how you manage net worth for a person or an estate or a trust
you