How do I Compose a Proforma?
A pro forma financial statement is a document prepared and included in a business plan. These financial statements contain projected financial information of the company. Pro forma statements are snapshots of how the owner believes the company's finances will look in the future.
Types
Pro forma statements are balance sheets, income statements and cash flow statements. The pro forma balance sheet shows the future account balances of all assets, liabilities and equity accounts. The pro forma income statement shows projected income and expenses. The pro forma cash flow statement shows future cash flows of the company.
Process
Creating a pro forma financial statement is done by viewing prior years' financial statements. The person who created the pro forma statements must analyze each individual type of financial statement and determine what will change in the coming year. Pro forma statements are created by using estimates.
Method
Many people use the gross profit method when calculating a pro forma income statement. This method states that the owner expects the income and expenses to increase by a specified percentage. If the percentage is determined to be 15 percent, then all items on the income statement are increased by 15 percent to create the pro forma statement.
Tags: forma statements, financial statement, income statement, cash flow, Compose Proforma, financial statements