A projected balance sheet is also referred to as a pro forma balance sheet. It shows the estimation of the total assets and total liabilities of any business. A pro forma balance sheet is a tabulation of future projections. As a result, it will help your business manage your assets now for better results in the future.
The asset will contain long-term assets (non-current assets ) and current assets. The long-term assets will include the building, land, machinery, and vehicles. Whereas the current asset includes the cash in hand/bank, receivables, and sock for the short term.
On the liability side, we have non-current liabilities and current liabilities. In the non-current liabilities, it includes the term loan and current liabilities include the account payable and short-term loan such as a working capital loan.
You may need to prepare a projected balance sheet if you have applied for a business loan for your new project or you are interested to buy new fixed assets. By showing a well-crafted projected balance sheet from Finline, the bank will get the confidence that the business unit is worth viable to invest/provide the loan.
How to Prepare Projected Balance Sheet
The following steps will help prepare the projected balance sheet:
Step 1: Calculate cash in hand and cash at the bank
If you have no booking record of your cash, you can show cash in hand after checking your cash balance in the business’s pocket. You can check also the available balance at the bank. Both will be your current assets on the balance sheet.
Step 2: Calculate Fixed Assets
See everything around you. Make the list of assets whose benefits are you taking more than one year. Check its price from cash memo or past bills. Try to calculate the time of its use. If you have used it for 3 years. Its value will surely decrease due to depreciation. Charge 10% to 20% per year on every fixed asset up to the used period with any method of depreciation. Now, you will get the current cost of the fixed asset. Show it on the asset side of the balance sheet.
Step 3: Calculate Value of Financial Instruments
If you invested your money in shares, bonds, and other financial instruments. Write its purchase price. If it has decreased, then you can also show the current market price of financial instruments.
Step 4: Calculate your Business Earning
If you have not made a profit and loss account. You can compare your expenses and your incomes. If your incomes are more than your expenses, it will be your net profit. That will be transferred to the liability side of the balance sheet. You should only deduct expenses whose benefits, you have obtained in one year.
Step 5: Calculate Business’s Liabilities
In these liabilities, you can add bank loans, secured loans, and other loans. That will be added to the liability side of the projected balance sheet.
Step 6: Calculate Business’s Capital
Business’s capital, you can calculate by subtracting outside liabilities from total assets. That will also add to the balance sheet on the liabilities side.
Non -finance/accounting people will be puzzled about how to create the projected balance sheet. Make one with Finline in less than 10 minutes as you just need to fill in the questions asked by the intelligent software, which will create the projected balance sheet.