Balance sheet is an important financial statement of any organization because it is an authentic way to show the financial position of your organization till specific date. It is perfect way to details assets, liabilities and owner’s equity of an organization. Pro forma balance sheet is often prepared to use for projections because it can effectively summarize whole important data. Pro forma is a specific term that is used to describe financial statement in better way through set number of assumptions. These assumptions are derived from the earlier business experience with similar company. A company can prepare different number of pro forma reports to scrutinize monetary inference of different business scenarios or strategies. Pro forma financial statements are frequently used by all business organizations either large scale or small scale to get budgetary, strategic and financing benefits. Here is a Pro-Forma Balance Sheet Template,
Tips to Design General Pro Forma for Any Balance Sheet
It is very easy to design general pro forma for any balance sheet and for your convenience I am going to share some tips to design pro forma for any balance sheet in effective way:
Carefully study your current balance sheet to analyze the financial state of your organization. Balance sheet of your organization reflects the health of your company by listing its assets, liabilities and equities. A standard equation is used to design balance sheet such as:
Assets = Liabilities + Owner’s Equity
Your balance sheet ought to state title, name of the corporation and date. You have to title your balance sheet account as “Pro Forma Balance Sheet” followed by name of the company and date for which you are forecasting information.
Asset Side of the Balance Sheet
- Assets are valuable parts of an organization that a company owns and is usually distributed in three categories. Current assets are highly liquid assets and can easily turn into cash within one year or less including cash and accounts receivable. Second category is fixed assets are long term assets such as building and machinery. Final category is other assets that are used to deal all those assets that are not fit into the other categories.
- Now make necessary adjustment in the balances of account as per your requirements. If you have planned to buy some new machinery to the date of pro forma then do not forget to increase equipment account. If you are expecting any increase in sales during the year then it is necessary to increase this amount in accounts receivable.
Liability Side of the Balance Sheet
- Liabilities are another important part of balance sheet that reflects the amounts that business owes and is divided into current liabilities and long term liabilities. Current liabilities show the amounts that a business is required to pay off within one year or less. Long term liabilities show those payments that have longer time frame to mature.
- You have to make necessary adjustments in the balance sheet by determining your upcoming activities such as if you have planned for financing in any larger asset in the year then include it in the liability side of the balance sheet.
- Now it is time to determine equity amount that is calculated with the help of this equation: Assets = Liabilities + Owner’s Equity
Projected assets should be written on the left side of statement while liabilities as well as owner’s equity will be written on the right side. Total both columns such as assets and liabilities and verify that these both amounts are equal.
Here is download link for the above mentioned Pro-Forma Balance Sheet Template,