Creating Your Forecasted Balance Sheet

After completing your Financial Budgets (step 1), your First Year Forecasted Cash Flow Statement (step 2), and your First Year Forecasted Income Statement (step 3), the next step is to develop your First Year Forecasted Balance Sheet (remember to create your forecasted financial statements one year at a time).

Recall from previous discussions, the Balance Sheet is a statement used to determine the financial strength and weakness of a business. It consists of four main components, namely; The Heading, Assets, Liabilities, and Equity. The Heading depicts the name of the company, the name of the statement and the date at which the account balances apply. Assets are items that have economic value to a company. Liabilities are items that have an economic burden on the company - usually items a business owes to other businesses. Equity consists of all the investments made into a company over the years - usually in the form of capital for sole proprietors & partnerships OR shareholder's investments & retained earnings for incorporated companies .

Below summaries the Budgets and Forecasted Financial Statements that need to be completed before you can develop your Forecasted Balance Sheet(s). Following this summary is Murray's 200X and 200Y Forecasted Balance Sheet (IE Scholarship Information Services).

The first column entitled "Opening July 1, 200X" has been taken from Budget 12, entitled "Developing Your Opening Balance Sheet". Moreover, this column lists the company's expected Assets, Liabilities and Equity on July 1, 200X.

The second column entitled "December 31, 200X" lists the company's Forecasted Assets, Liabilities and Equity on December 31, 200X. In other words, this represents Murray's 200X Forecasted Balance Sheet. Murray would have used several Budgets (illustrated above), his 200X Forecasted Cash Flow Statement and 200X his Forecasted Income Statement in order to develop his 200X Forecasted Balance Sheet.

The third column entitled "December 31, 200Y" lists the company's Forecasted Assets, Liabilities and Equity on December 31, 200Y. In other words, this represents Murray's 200Y Forecasted Balance Sheet. Before Murray could develop his 200Y Forecasted Balance Sheet, however, he would have had to complete all forecasted statements and analysis for 200X, his 200Y Forecasted Cash Flow Statement, and his 200Y Forecasted Income Statement.

When all Forecasted Balance Sheets have been developed, they can be placed into columns on one single page (as illustrated above).

PLEASE NOTE:
Make sure your TOTAL ASSETS equal the sum of your TOTAL LIABILITIES and TOTAL EQUITY. If they DO NOT equal, then your Forecasted Balance Sheet is NOT in "Balance" and therefore, must be recalculated. Below proves that Murray's Total Assets equal the sum of his Total Liabilities and Total Equity.

ADDITIONAL EXAMPLES ON FORECASTED BALANCE SHEETS

J&B Incorporated
The Internet Company
The Maple Syrup Company

For additional information, please refer to the section entitled "The Balance Sheet".