Chapter 3:Terminology of income statement and balance sheet (Develop from Robert Kiyosaki )

Before i proceed to explain some details about elements of income Statement and Balance Sheet ,now i have a good statement at which all reader should take a look at it and THINK .

“Most of us learn about money from our parents. So what can a poor parent tell their child about
money? They simply say ‘Stay in school and study hard.’ The child may graduate with excellent
grades but with a poor person’s financial programming and mind-set.”

i also comes from a poor family,even i heard those statement from my mom and my stepsisters during my childhood period,but for me,those statement are no longer useful again because ‘Stay in school and study hard ’is not a absolute solution for me to go further in achieving freedom.

OK..right now let me teach you what is income statement and balance sheet all about.And for you information,i'm only explained balance sheet(powerful “expense:income, asset:liability”money flow
framework to explain wealth creation or lack of it).

Know the difference between an asset and a liability, and buy assets.

• The top two boxes represent an Income Statement, identifying money coming in and going out.The bottom diagram is the Balance Sheet showing a person’s assets and liabilities.

• Income: Referring to money coming into our pocket. A property rented out is generating income.

• Expenses: Referring to money going out of our pocket. Our house that we need to spend money to maintain it is expenses.

• Asset: Referring to something that will appreciate over time such as business, real estate, stock, gold, education, etc. This will be the key thing where it will help putting money into your pocket.

• Liability: Referring to something that will depreciate over time such as cars, house, debt, etc. Liabilities will be taking money out of your pocket. I was shocked to realise that my investment in my own home was not considered an asset, but a liability instead.

Just like i mention before on previous posts ,to become rich, we need to master the fundamentals of money before we start to invest or go into business. We need to understand income statement and balance sheet, and truly understand the definition of asset and liability.