How to Construct a Pro Forma Balance Sheet
A balance sheet is the statement of a company's financial position as of a specific date. It details a company's assets, liabilities and owners' equity. A pro forma balance sheet is a summary statement that is often used for projections. A company may prepare a number of pro forma statements, each with different numbers, to analyze the financial implications of various business scenarios or strategies.
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Things You'll Need
- Current balance sheet
- Blank spreadsheet
- Financial documents showing assets
- Financial documents showing liabilities
- Evidence of equity shares
Instructions
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Select the business strategy (Strategy 1) that the numbers on your pro forma sheet will reflect. Designate a name for the strategy and label your blank spreadsheet accordingly.
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2
Pick a future date on which the strategy will be assessed and enter the date on the PFS. Make sure that the strategy has enough time to play itself out in your projections. Two months may be too short. One year is a good starting point.
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3
Calculate the baseline figures for your assets, liabilities and owner's equity from your financial documents. The baseline figures are the actual figures for your assets, liabilities and owner's equity. You can also use the figures from a current balance sheet as the baseline figures.
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4
Project new figures for your assets, liabilities and owner's equity based on Strategy 1. Consider how your assets and liabilities will change during the time period for which you are projecting. If you intend to sell a new product, there will be new expenditures for inventory and potential shipping and marketing expenses. On the other hand, there will be an increase in revenues from sales. Enter all relevant figures into your pro forma spreadsheet. Save your PFS for Strategy 1.
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Label a new spreadsheet and repeat the process for each new strategy or time period. Use all your PFSs to compare different business scenarios by analyzing their effects on balance sheet items such as cash on hand, owner's equity, marketing expenses and retained earnings.
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