BALANCE SHEET/PERSONAL FINANCIAL STATEMENT (PFS)

Asset (Formal definition) – Investopedia states an asset is a resource with economic value that an individual, corporation, or country owns or controls with the expectation that it will provide a future benefit.

Asset (Stated Plainly) – This is anything you own….

*Please note that when you spend money on a product for your operation it becomes an asset. In addition to the obvious items such as livestock, equipment and land; common items that are often forgotten and costly are Vet supplies, Mixed Feed, Hay, Chemical, Fertilizer, bulk diesel etc.* DON’T SELL YOURSELF SHORT, EVERYTHING IS EXPENSIVE AND NEEDS TO BE TAKEN INTO ACCOUNT.

Liability (Formal definition) – Investopedia state a liability is something a person or company owes, usually a sum of money. Liabilities are settled over time through the transfer of economic benefits including money, goods, or services. Liability (Stated Plainly) – Every dollar you owe to anyone in the world…

*With liabilities you should have record of the current amount you owe on all your debts in addition to the interest rates if there is one and how many more payments you have left. Items often forgotten are, the balance on trade accounts such as John Deere parts and service line, Coop bill, feed bill, etc. This only includes items that have been billed not items to be billed.*

Net Worth (Formal Definition) – Investopedia states net worth is the value of the assets a person or corporation owns, minus the liabilities they owe. It is an important metric to gauge a company’s health, providing a useful snapshot of its current financial position.

Net Worth (Stated Plainly) – Estimate of what you would have if you were to sell everything off and pay everyone back.

*Net worth is also referred to the equity in your operation. *

The balance sheet gets a lot more technical than theses three terms but if you can understand the information above, it would give you a foundation to build off of and a better understanding of how your daily work translates into future wealth for you and your family.