The statement of net worth
The statement of net worth: assets, liabilities, and what a business or person is really worth. Read one part at a time and tap “I know this”. Then test yourself in the quiz.
Know it already? Jump straight to the quiz
The formula
| Assets | Liabilities | Net worth |
|---|---|---|
| R120 000 | R45 000 | R75 000 |
| R25 000 | ? = R7 000 | R18 000 |
| ? = R20 000 | R6 000 | R14 000 |
Where does it go on the statement?
- Cash in the till, stock and a delivery bike: assets.
- A bank loan: liabilities. Money you owe a friend is not an asset.
- A car you are still paying off: the car under assets, the debt under liabilities.
- A customer who owes money is a debtor (asset); somebody you owe money is a creditor (liability).
What changes net worth?
Buy a van for R150 000 with R50 000 cash and a R100 000 loan: net worth does not change (assets and liabilities both change). Sell stock for more than it cost: net worth rises. High assets do not always mean a high net worth: the liabilities could be just as high.
A budget shows planned money; the statement of net worth shows what you own and owe now.
A personal statement of net worth
A person can also draw up a statement of net worth. List the assets first, then the liabilities, and subtract the totals.
| Mrs Dlamini’s statement of net worth | Amount |
|---|---|
| Assets | |
| House | R600 000 |
| Car | R120 000 |
| Furniture | R40 000 |
| Savings | R15 000 |
| Total assets | R775 000 |
| Liabilities | |
| Home loan | R350 000 |
| Car loan | R80 000 |
| Clothing account | R5 000 |
| Total liabilities | R435 000 |
| Net worth: R775 000 − R435 000 | R340 000 |
Remember this and test yourself
- Net worth = assets − liabilities: R80 000 − R30 000 = R50 000.
- Negative net worth: the business owes more than it owns (R40 000 − R50 000 = −R10 000).
- Order on the statement: assets, then liabilities, then net worth.
- Know two figures and you find the third: liabilities = assets − net worth; assets = liabilities + net worth.
- Increase net worth by increasing assets or reducing liabilities.
Write these points in your book. Read them again the night before the test.
Net worth = what you own minus what you owe: “Own minus owe is what you are worth.”
Important words
First say what the word means, then turn the card over.
Match column A to column B
Tap a word in column A, then its meaning in column B. You can also start in column B.
True or false?
Read the question and the answer. Is the answer right? Tap True or False.
Now the real quiz!
The quiz has many more questions on this topic. Every question shows straight away whether you are right and explains why.
Take the quiz: The statement of net worth- Read one part together and ask your child to tell it back in their own words.
- The ticks (“I know this”) are saved on this device only. We never ask for names or emails.
Follows CAPS for Grade 7 Economic and Management Sciences (EMS). Always check your teacher’s notes and textbook too.