Creating a Forecasted Balance Sheet and examples

2.  THE FORECASTED BALANCE SHEETS

The next statement to appear in the financial plan are your Forecasted Balance Sheets.  Further, three annual (year end) Forecasted Balance Sheets should follow your three year projected income statement. These forecasted balance sheets show investors the items your business anticipates to own at the beginning and end of each forecasted year. In addition, these Balance Sheets will show investors how much your business anticipates to owe at the beginning and end of each forecasted period. By developing a forecasted annual balance sheet for three years into the future, you and investors will be able to determine if your proposed business provides an opportunity (I.E. profitable).

In addition to the three year forecasted balance sheet, investors will want to see an opening balance sheet. An opening balance sheet generally shows the businesses' assets, liabilities, and owner's investments into the business.

The three year forecasted balance sheets should be placed on one page. Moreover, the one page will consist of four columns - one column for your opening balance sheet, one column for the first year forecasted balance sheet, one column for the second year forecasted balance sheet, and one column for your third year forecasted balance sheet. Below provides an example of J&B Incorporated's forecasted Balance Sheet.

 

J&B Incorporated
Forecasted Balance Sheets
Ending April 30...
April April April April
200W * 200X ** 200Y 200Z
CURRENT ASSETS:
Ending Cash (note 21) $ 63,314 $ 57,608 $ 61,968 $ 94,091
Office Supplies (note 6) $ 0 $ 500 $ 735 $ 476
Finished Diskette Inventory (note 2) $ 0 $ 6,683 $ 2,803 $ 1,790
Finished CD Inventory (note 2) $ 0 $ 3,103 $ 2,072 $ 2,053
Total Current Assets $ 63,314 $ 67,894 $67,578 $ 98,410
FIXED ASSETS:
Net Computer Equipment (note 16) $ 7,602 $ 9,426 $ 10,034 $ 11,642
Net Office Furniture (note 17) $ 1,412 $ 2,425 $ 3,018 $ 3,712
Net Intangible - Initial R&D (note 18) $ 47,772 $ 31,848 $ 15,924 $ 0
Net Intangible - Future R&D (note 19) $ 0 $ 74,161 $140,923 $179,789
Total Fixed Assets $ 56,786 $117,860 $169,900 $195,143
TOTAL ASSETS $120,100 $185,753 $237,477 $293,553
LIABILITIES:
Accounts Payable (note 22) $ 0 $ 4,975 $ 5,274 $ 6,394
Wages & Employee Benefits (note 23) $ 0 $ 1,686 $ 2,049 $ 2,336
Operating Loan Payable (note 13) $20,000 $ 0 $ 0 $ 0
Taxes Payable (note 20) $ 0 $ 29,698 $ 31,728 $ 34,919
TOTAL LIABILITIES $20,000 $ 36,359 $ 39,051 $ 43,649
SHAREHOLDER'S EQUITY:
100 Class A Common Shares (note 24) $ 100 $ 100 $ 100 $ 100
50 Class B Common Shares (note 24) $100,000 $100,000 $100,000 $100,000
Retained Earnings (note 25) $ 0 $ 49,294 $ 98,326 $149,804
TOTAL SHAREHOLDER'S EQUITY $100,100 $149,394 $198,426 $249,904
TOTAL LIABILITIES & EQUITY $120,100 $185,753 $237,477 $293,553
* April 30, 200W represents the forecasted account balances at the end of the product's development phase.
** April 30, 200X represents the forecasted account balances at the end of the company's first year of operation.

 

Notice J&B's three year Forecasted Balance is one page in length. The Asset, Liability, and Equity "items" are listed on the left hand side, while each year's forecasted account balances (values) are shown in a column to the right. Your forecasted balance sheet for a year three period should appear in a similar fashion;  it is more tidy and investors can compare your expected financial position from year to year.

Also, notice after each account item that a note and a number is stated. These numbers refer to the Notes to the Financial Statements and allows readers (investors) the opportunity to see how J&B arrived at each account balance or value. This will become more apparent later on as we discuss Part C of the Financial Plan entitled "Notes to the Forecasted Financial Statements".

This concludes our discussion on how the projected balance sheet should appear in your Financial Plan. Remember it is imperative to understand the theory behind the Balance Sheet before attempting to forecast your own. To learn more about this statement, please refer to the section entitled "The Balance Sheet". When you understand the theory behind each financial statement and analysis, you will be equipped with the necessary tools needed to Forecast Your Own Forecasted Financial Statements.

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