written by khatabook | November 15, 2022

Exclusive Guide On Net Worth Certificate of Individual And Company

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Table of Content


Individual or enterprise net worth equals the sum of their assets minus their liabilities. Thus, net worth gives a good indication of a person's financial status at a given moment. A positive net worth that increases yearly indicates good financial health; on the other hand, a negative net worth or a declining net worth indicates poor financial health. Various processes use net worth to measure economic health. Keep reading to know more about net worth certificates of individuals, companies and net worth certificate examples.

Did You Know? People extensively used a net worth certificate during the 1980s savings & loan crisis; however, in 2008, they did not appear to be used.

What is a Net Worth Certificate?

A net worth certificate is a document that includes all assets and liabilities of a company or individual. It is usually compiled and certified by a Chartered Accountant. Various applications may require a net worth certificate for the decision maker to gauge the applicant's financial health. 

When is a Net Worth Certificate Necessary?

1. Visa Application: It is essential to submit a net worth certificate to estimate the applicant's financial net worth when applying for a visa.

2. Bank Loan Application: If you are applying for a bank loan, you must attach it to the application so that the bank knows your net worth or business.

3. Franchisee Application: A franchisor may also request a net worth certificate to estimate the franchisee's net worth if they apply for a franchise.

How Does Net Worth Certificate Work?

 Net worth is used as an indicator of financial health in various processes. Net worth certificate is a document that is compiled and certified usually by a Chartered Accountant taking into consideration all the assets and liabilities of the individual or Enterprise. 

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How to Get a Net Worth Certificate?

Below are the four significant steps involved in obtaining a net worth certificate.

Step 1: Pre-Consultation: First, it is essential to consult with knowledgeable people regarding the best way to obtain a net worth certificate for individuals and a  net worth certificate for partnerships.

Step 2: Connecting With a CA: One can seek help from an online service provider if one wishes or by contacting a Chartered Accountant (CA).

Step 3: Review: A document, record, asset, or liability that the CA has requested can be submitted once the discussion is complete with the CA.

Step 4: Certification: After receiving the requested documents, the CA will compute the calculations and prepare the certificate. The CA will finally issue the certificate of total net worth once the preparations are complete.

Requirement for Getting a Net Worth Certificate

Personal KYC Document Required for Networth Certificate 

  1. ID Proof: PAN Card / Aadhar Card / Driving License / Voter ID Card / Passport.
  2. Address Proof:  Aadhar Card / Voter ID Card / Passport / Bank Statement or Passbook / Electricity Bill / Tax Bill / ITR / Property Index Copy etc.
  3. Mobile No/ Email ID

The following are movable assets that are needed to obtain a  net worth certificate. 

1. Fixed assets: These include assets like buildings, computer equipment, land, and furniture.

2. Intangible assets: For example, goodwill, brand recognition, and copyright.

3. Investment details include investments in stocks and bonds, mutual funds, etc.

4. Capital of Business: The financial resources that are available to the business

5. Vehicles: These include information about the cars or vehicles in which the company is involved

6. Pledged securities: These include promissory notes, stock certificates, and the like

7. Bank Balance: The account's ending balance of cash at the end of the day.

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How is the Net Worth Certificate certified in India?

Chartered Accountants (CAs) are only qualified to certify net worth certificates for visas in India. It is necessary to quote the UDIN (Unique Document Identification Number) produced by the Chartered Accountant duly generated to verify the authenticity of a Net worth Certificate online. Moreover, the CA's seal, signature, and the date and location of the signature are required.

Contents of a Net Worth Certificate

The net worth certificate usually contains the values of movable and immovable assets.

Immovable Assets:

  • Bungalow or Plot
  • Apartments or Flats for Residence
  • Office or Commercial Spaces etc
  • Agriculture Land or other Land
  • Any furniture available etc.
  • Assets or Other Immovable Property

Movable assets:

  • Money in the bank, FDs, mutual funds, shares, etc.
  • Vehicles (cars, bicycles, buses, planes, etc.)
  • Ornaments made of gold, diamonds, metal, etc.
  • Various debts, stocks, and assets valuation at book value.
  • The value of life insurance, investments, etc., at the time of death

Net Worth Certificate Example

NET WORTH CERTIFICATE (on the Letter head of Registered Chartered Accountant) 

This is to certify that the Net worth of M/s. / Mr. / Ms. ……………………… as on …………… is Rupees ………………. only as per the statement of computation of even date annexed hereto. It is further certified that the computation of Net worth, based on my/ our scrutiny of the books of accounts, records and documents, is true and correct to the best of my / our knowledge and as per information provided to my / our satisfaction. 

Place: For (Name of Accounting Firm) 

Date:

Name of Partner Chartered Accountant Membership Number 

(Rubber Stamp)

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Conclusion

Net worth certificate from a Chartered Accountant is commonly required as a part of visa application, bank loan application, franchisee application and more. Banks could utilise these certificates in times of crisis to effectively capitalise on their net worth.

So, knowing how to get a  net worth certificate will be extremely helpful in determining the financial status of a person or business. Additionally, a Chartered Accountant must sign the net worth certificate to ensure its accuracy. Obtaining a certificate from an unauthorised service will be considered a scam and not valid. 

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FAQs

Q: What is the formula for calculating the net worth of a sole proprietorship?

Ans:

Before considering the proprietorship  net worth certificate, it is essential to make a list of all the business and personal assets of the proprietorship as it serves as evidence of the proprietorship's financial well-being. After determining the market value of the support, the next step is to calculate the price. The assets do not have any outstanding liabilities. Subtract the asset's market value from the loan balance if you purchase anything on the payments. A final step is to add all the equity that all the assets have generated. Sole Proprietor Businesses determine their net worth by calculating the result or value.

Q: What is the best way to calculate the net worth of an individual or a company?

Ans:

As a rule of thumb, net worth is calculated by adding the total liabilities to the total assets and subtracting the difference.

Net Worth = Total assets – Total liabilities

The term 'shareholder equity' refers to this. Businesses and companies use the same formula to calculate an individual's net worth.

Q: Do net worth certificate require UDINs?

Ans:

As far as the net worth certificate is concerned, obtaining the UDIN is mandatory. Please register at the UDIN Portal once you receive it.

Q: Are net worth certificate mandatory for everyone?

Ans:

A Net worth certificate is optional for everyone, and depending on the situation, entity, and purpose, it varies from person to person. It is essential to have a  net worth certificate if you plan to apply for a Visa, franchisee, or bank loan shortly.

Q: Who provides a net worth certificate?

Ans:

Chartered Accountants generally issue  net worth certificates because they are the authorised certifiers of a  net worth certificate.

Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.