ASC 274: Personal Financial Statements
What are personal financial statements and what do they entail? ASC 274: Personal Financial Statements covers this topic in-depth, outlining the different types of statements prepared for individuals and their specific purposes. Individuals rely on personal financial statements for a variety of reasons, including assessing credit risk and determining whether to grant loans. In this blog post, we’ll provide an overview of ASC 274 and discuss some key concepts related to personal financial statements.
What is GAAP?
GAAP is a common set of accounting principles, standards, and procedures. Public companies in the United States must follow GAAP when they compile their financial statements. To that end, the Financial Accounting Standards Board (FASB) maintains GAAP. Moreover, the board issues new rules as necessary to ensure that GAAP remains up-to-date.
Where Can I Research GAAP?
FASB provides free online access to the Accounting Standards Codification, which is the only authoritative source for US GAAP. FASB and the AICPA also provide access to other authoritative literature that supplements the GAAP Hierarchy.
To access the Accounting Standards Codification, visit asc.fasb.org. Anyone can access the codes using a basic account. For more advanced features you can set up a professional account. To that end, if you work at a company subject to GAAP rules, your company likely has a professional account.
What Are Personal Financial Statements?
Personal financial statements are financial reports prepared by individuals. The statements summarize an individual’s assets, liabilities, and equity. Individuals use these statements for a variety of purposes, including planning for retirement and applying for credit.
What Are the Different Types of Personal Financial Statements?
There are two primary types of personal financial statements: balance sheets and income statements.
A balance sheet provides a snapshot of an individual’s assets and liabilities at a specific point in time. The statement lists all of the individual’s assets, including cash, investments, property, and personal belongings. The statement also lists all of the individual’s liabilities, including credit card debt, mortgages, and other loans. Finally, the balance sheet lists the individual’s equity, which is the difference between the value of their assets and the value of their liabilities.
An income statement, on the other hand, provides a record of an individual’s financial activity over a period of time. The statement lists all sources of income, including wages, interest, and dividends. The statement also lists all expenses, including rent, utilities, and food. Finally, the income statement lists the individual’s net income, which is the difference between their total income and their total expenses.
What Is ASC 274?
ASC 274 is a Subtopic of GAAP that addresses personal financial statements. The Subtopic provides guidance on the preparation of balance sheets and income statements for an individual. ASC 274 also provides guidance on the disclosure of personal financial information.
What Are the Key Concepts of ASC 274?
There are four key concepts related to ASC 274: (I) the types of personal financial statements, (ii) the purpose of personal financial statements, (iii) the users of personal financial statements, and (iv) the disclosure requirements for personal financial statements.
Under ASC 274, individuals are required to provide certain disclosures in order to give users of their financial statements a clear understanding of personal financial position and the ability to repay debt
Why Does It Matter?
The presentation and disclosure of financial statements can have a major impact on the decisions made by users of those statements. For example, if a lender is trying to verify that someone can pay debt , ASC 274 provides the guidance needed to make sure that the financial statements accurately reflect that individual’s ability to repay the debt.
ASC 274 follows the framework set by ASC 205 and requires individuals to provide certain disclosures in order to give users of the financial statements a clear understanding of their financial strength.
ASC 274 is important for both individuals and businesses because it provides guidance on how personal financial information should be presented. This Subtopic ensures that users of personal financial statements have the information they need to make informed decisions.
Let’s Recap
In a nutshell, ASC 274 is a Subtopic of GAAP that addresses personal financial statements. The Subtopic provides guidance on the preparation of balance sheets and income statements for an individual. ASC 274 also provides guidance on the disclosure of personal financial information.
The key concepts of ASC 274 are the types of personal financial statements, the purpose of personal financial statements, the users of personal financial statements, and the disclosure requirements for personal financial statements. ASC 274 follows the framework set by ASC 205 and requires individuals to provide certain disclosures in order to give users of the financial statements a clear understanding of their financial strength.
The presentation and disclosure of financial statements can have a major impact on the decisions made by users of those statements. ASC 274 is important for both individuals and businesses because it provides guidance on how personal financial information should be presented. This Subtopic ensures that users of personal financial statements have the information they need to make informed decisions.
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