NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Introduction to Personal Financial Planning
Which of the following is correctly classified as a liability that should be shown on a client's personal balance sheet?
Outstanding home loan principal is a liability because it is an amount the client owes at a point in time. Mutual fund units are assets, and premiums paid or grocery spending are flows in the cash flow statement, not balance sheet positions.
- AOutstanding home loan principalCorrect
- BMarket value of the client's mutual fund units
- CPremium paid last year on a term plan
- DMonthly household grocery spending
Explanation
A personal balance sheet lists assets and liabilities at a point in time. Outstanding loan principal is an obligation, hence a liability. Mutual fund units are assets, while premium paid and grocery spending are cash flow (expense) items, not balance sheet items.
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