What Is A Pro Forma Balance Sheet? How Do You Create One?


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Matthew Porter Profile
Matthew Porter answered
A pro forma balance sheet is similar in style to a conventional balance sheet but shows future predictions for your company, rather than the current financial state of affairs. A balance sheet shows all the outgoings and incomings of a company over a certain period of time. One side shows the assets and liabilities, whilst the other side shows how they are funded. These two sides must match in value so that the sheet is balanced. A pro forma balance sheet shows similar information, but shows events that have happened during the period of time in which the balance sheet had been drawn up as happening at the start of when the balance sheet was drawn up. This enables people in the company to recognise trends more easily and estimate what kind of cash position they will have at a certain point in time. To create a pro forma balance sheet, you must know how much cash will be in your company’s account at the start of the process. If services provided by your company are not to be received by the start date of your balance sheet, estimate this total. This is called Pro Forma accounts receivable. Adding these two figures together will create your pro forma current assets. Pro Forma land is the value of land owned and is easily calculated as land prices remain fairly stable. Pro Forma buildings and vehicles depreciate so calculate the total and add it on. These are your assets. Now calculate your Pro Forma liabilities. Pro Forma accounts payable are your outstanding bills and Pro Forma accrued payroll is your wagebill. Pro Forma common stock is the amount owned by shareholders in equity. Your total assets must equal the total liabilities and equity. The difference at the end equals your retained earnings.
d ds Profile
d ds answered
A pro forma balance sheet is just like a normal balance sheet, that is, it has the same format but the figures used in the balance sheet are all based on estimates and future projections. This indicates the firm’s future plans and how the firm wants to function in the future. The estimates are made keeping in mind the current and past performance of the firm. The best way is to determine the growth rates in the various accounts and then project it into the future. To make a pro forma balance sheet you can visit www.businesstown.com

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