Entrepreneur's Handbook

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Entrepreneur's Handbook

PROFORMA FINANCIAL STATEMENTS

 

The amounts resulting from the budgeting activities should be shown in the financial statements. Showing and reporting the results of the budgeting activities for different groups in a table will clearly reveal the size of the budgeted figures.

The process of preparing pro forma financial statements starts with the preparation of the sales budget and related production budgets (Direct raw materials, Direct labor, General production expenses) and production cost budgets, following the demand forecast. Cost of sales table is prepared based on this information. After the preparation of research and development, marketing, sales and distribution, general management and financing expenses budgets, cash inflows and outflows are obtained from the data in the prepared budgets and a cash budget is prepared. Subsequently, the income statement and balance sheet can be edited proforma. (Kaygusuz and Dokur, 2009, ss.549-550).

Proforma financial statements are financial statements forecasted in the future and present the amounts that may arise based on the estimation in case the activities expected to be performed for the specified period are realized. Proforma balance sheet and income statement can be considered as a guide during the realization of the investment.