Proforma Balance Sheet

Managing assets is one of the most important and complex tasks a business has to perform. The Proforma balance sheet is a document that enables a business to predict how it will manage its assets in the future. The details about the money associated with assets and inventory can easily be obtained through the Proforma balance sheet.

Although the Proforma balance sheet resembles the historical balance sheet, it is used to obtain information about the future. It is very important for a business to know whether it will run out of money or will have extra money in the future. On the basis of this information, a business can take several steps. In other words, a sound a company will be working on in the future can be predicted through the Proforma balance sheet.

A company’s projected future status is summarized using a proforma balance sheet. This is done after a much-planned transaction based on the recent financial statement.

What is the purpose of creating a Proforma balance sheet?

Many businesses prefer using Proforma balance sheets because they can easily manage their assets. Managing assets in the present enables a business to get better results in the future. For this reason, the business prepares and uses the Proforma sheets.

A person is required to prepare a proforma balance sheet whenever he is required to have one. The amount of money a company has earned and other finance-related activities are included in the statement made with the help of a proforma balance sheet.

The sheet must label all the figures properly and mention all the figures that have deviated. It summarizes all future transactions, such as new capital investment and assurance of quality; the anticipated results obtained from future statements are modelled through this balance sheet. The modelled transactions are particularly those that focus on projected net flow, net revenue, and taxes.

If a pro forma sheet has been decided to be applied to the business, it should contain all current assets, inventories, non-current assets, intangible assets, financial and biological assets, liabilities, unearned revenue, equity, and the net balance of the assets.

Lenders and investors can use this sheet to structure debt compliance, which can be very helpful for them. The proforma balance sheet is also prepared when a new company is envisioned to inform prospective investors about the company’s information.

Every business can use this sheet for their own purpose of forming the status sheet of the company.

What should be included in the Proforma balance sheet?

1. Long-term assets:

This sheet mentions all of a company’s long-term assets. The sum of total long-term assets is also shown in the Proforma balance sheet. Buildings, land, and vehicles owned by a business are all long-term assets. The asset value of all long-term assets is calculated by subtracting the depreciation value from the original price of the asset.

2. Short-term assets:

Short-term assets include the cash money and some account receivables. The income of the company from any source is included in account receivables. The short-term assets are not available to business for a long period of time

3. Liabilities:

The money payable by the business is included in the sheet. Liabilities include money a business has to pay in the form of employees’ salaries, loan payments, and other payables. This part of the balance sheet also includes the amount of mortgage.

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