How to Calculate Net Worth for a Net Worth Certificate

Net worth is everything you own minus everything you owe

Assets less liabilities, measured on one stated date. Everything else in a working exists to evidence those two totals. Anyone asking how to calculate net worth for a net worth certificate is really asking three narrower questions: which items belong on each side, at what value each enters, and which date the whole thing speaks to.

The number is not income and it is not turnover. It is what you own after what you owe is taken off, and nothing that will happen next month enters it. In practice the working answers to the reader who asked for it, so the schedule names its own basis for every line rather than pointing at a section number.

• Not incomeSalary, rent and interest earned during the year are flows. Only the balance they have left behind on the date counts.
• Not turnoverA business's sales say nothing about what the person who runs it is worth. That person's share of the business enters as an asset, valued on a stated basis.
• Not a tax computationExemptions and deductions belong to the return. Here an item is in or out on evidence and ownership alone.

Listing assets a CA will accept, and at what value

Begin with balances that a third party already reports, because those lines are the cheapest to prove and the hardest to argue with. Move to instruments with a published price. Leave immovable and physical holdings for last, since each of them needs a valuation basis named openly. What divides an accepted schedule from a returned one is simple: every line has to trace back to something issued by somebody else, so the paperwork behind each entry is worth gathering before any arithmetic begins.

Valuing property, gold and unlisted shares without guesswork

Three numbers compete for the same flat, and they rarely agree. The schedule has to pick one and say which it picked, because a reader who cannot see the basis will assume the most flattering one was chosen.

Where a report is needed, its author matters. A report from a valuer on the register kept under the Companies Act withstands questioning better than a letter from an estate agent. Registered valuers work under section 247 of the Companies Act, 2013 and the Companies (Registered Valuers and Valuation) Rules, 2017, in force from 18 October 2017. The Insolvency and Bankruptcy Board of India keeps the register, in three asset classes: land and building, plant and machinery, and securities or financial assets. The schedule should also name the basis the report adopted, because what a willing buyer would pay is a different measure from cost, and a reader will want to know which one the figure is.

Liabilities people forget to deduct

Under-deduction is the commonest error in a self-prepared working, and it is nearly always innocent. A housing loan gets entered at the amount sanctioned rather than the amount still owing, or occasionally the reverse. What belongs in the schedule is the sum outstanding on the chosen date, taken from the lender's confirmation for that exact date. Vehicle loans and personal loans behave identically, and each needs its own confirmation.

• The home loan, at the wrong figureNot the sanctioned sum and not last year's balance: the principal outstanding on the date, from the lender's statement for that date.
• Card balancesNobody thinks of a card as a loan. The balance outstanding on the date is one, including purchases billed but not yet due.
• Overdraft drawn and loans against assetsAn overdraft limit used, a gold loan, an advance taken against a deposit or an insurance policy. Each is a liability at the sum drawn, and the asset it sits on stays on the other side at full value.
• Money owed to relativesBorrowings from a parent or a sibling carry no statement at all. The honest treatment is to list them on your own written representation rather than leave them out.
• A tax demand already raisedAn income-tax or GST demand served on you and still unpaid on the date is a liability. A demand you are contesting is disclosed in a note with its status; it is not quietly dropped.
• A guarantee you gaveStanding surety for another borrower is a liability only if that borrower defaults. It is disclosed below the total, not deducted from it; the next paragraph says why.

Guarantees sit in a category of their own. Standing surety for another borrower creates an obligation that has not crystallised: nothing is owed unless the principal borrower defaults, so the sum is disclosed below the total rather than deducted from it. The disclosure is not a formality. A reader who sees three sureties listed beneath the figure reads the figure differently, and that is precisely why they are listed.

Assets a CA will strike off your working

Three kinds of line get struck out at review, and the first is the largest. None of the items below is fictitious. None of them is certifiable either, and knowing that before the schedule is drafted usually saves writing a second one.

Occupying a property and paying its bills proves neither title nor share. Personal effects of small value are commonly left out, and where the reader of the certificate asks for them they go in at a nominal figure with the omission or the basis said openly. Understanding what an acceptor treats as evidence before the schedule is drafted is the cheapest correction there is.

The arithmetic worked out on a salaried family's asset list

Take a salaried couple with a jointly owned flat, and build one spouse's schedule. Every figure below is invented for the arithmetic; the point is the shape of the working, the basis written against each line, and the note at the end.

The note is short and does real work. A reader who disagrees with any of those choices can now say so precisely, which is the whole purpose of writing them down. A schedule without the note invites the reader to guess at the basis, and the guess is rarely generous.

Check your number against the net worth calculator

A working done by hand is worth checking against something that adds it the same way twice. Entering the schedule line by line separates arithmetic slips from judgement calls, and it is the judgement calls that a reviewer will question. Read the output before anybody else does.

• Higher than you expectedUsually a valuation nobody can support: a flat at an asking price rather than a report, or jewellery at a remembered rate. Go back to the valuation section and name the basis.
• Lower than you expectedUsually a loan counted twice, once netted off the asset and again as a liability, or a joint loan carried in full against a half share. Check the gross-or-net panel.
• Different every time you run itUsually a date problem: one line at a month-end, another at the day you happened to log in. Every balance, price and loan statement has to speak to one date.

A working is not a certificate. The figure becomes usable to a bank, a consulate or a tender board only when a chartered accountant has examined the evidence behind each line and attested the result. That is where the figure is attested, and the schedule built here is exactly what the attestation rests on.