This article details a beginners guide to capital statements; what to include in them, what the figures mean and how to understand and interpret them; avoiding common pitfalls many individuals experience along the way with filing their own.. Capital statements (also referred to as wealth statements) are similar to profit & loss sheets for a company except capital statements are typically used to measure and record an individual’s finances using an official document accumulated on differing dates.
The statements are then joined or what’s known as bridged by identifying the entries that have resulted in the increase of the net wealth in the overruling timeframe against expenditure that have resulted in the decrease of the net wealth in the same timeframe. Any unaccounted for gaps in an individuals capital statement signify inconsistencies and the consequent requirement for authorities to look into why.
Net wealth or net assets is the cumulative value of assets owned, minus the cumulative value of the liabilities owed on the same date.
The main determination of capital statements is not to define how well or badly an individual’s finances are; rather to explain and validate the increase or decrease of assets during the timeframe between two successive capital statements.
Reportable assets can be illustrated as the following entries:
Ideally, the individually reported monetary amounts should be rounded up or down to the nearest thousand, therefore avoiding flooding the overall representation with insignificant digits.
The inflows of funds, which result in an increase of the previously reported net assets, and the outflows, which result in a decrease of the previously reported net assets, must be identified under the following categories:
Yes, a qualified Accountant or Service Provider should certify the statements looking for moderation and comprehensiveness and for being in synchronisation with other related records such as filed tax returns and bank statements. The enlisting of a professional Accountant or licensed Service Provider will eliminate any mistakes made by those obligated to file such statements.
For assistance with the filing of your annual capital statement, Eltoma has qualified Accountants on hand to help with any filing requirements. Contact us for more details.