Budget vs Forecast vs Projection vs Pro Forma

The terms financial budget, financial forecast, financial projection and pro forma financial statement are often used to refer to the same thing. However, while they have a very similar format, normally comprising a balance sheet, income statement, and cash flow statement shown over a period of months or years, they are each based on a very different set of assumptions.

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Pro Forma Financial Statements

The terms pro forma financial statements, financial projections, financial forecasts, and financial budgets are often used interchangeably, but they are not the same thing.

Pro forma financials simply refers to a set of financial statements in the usual format (balance sheet, income statement, and cash flow statement), which have been prepared in order to show the effects of a transaction on the historical financial statements prior to the transaction actually taking place.

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Cash Flow Forecast

The cash flow forecast is one of the main financial statements for business plan financials. The cash flow forecast shows the cash paid and cash received by the business during an accounting period.

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Income Statement Forecast

The income statement forecast, sometimes called the profit and loss forecast, is one of the main statements for business plan financials. The income statement forecast shows a business’s financial performance over an accounting period. The accounting period can be any length but is usually a month or a year.

There are many income statement forms, the layout below acts as a quick reference, and sets out the most commonly encountered accounting terms when dealing with a business plan income statement forecast.

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Balance Sheet Forecast

The projected balance sheet forecast is one of the main statements for business plan financials and is sometimes referred to as the statement of financial position. The balance sheet forecast shows a financial snapshot of the business at a specific point in time, usually at the end of  each accounting year.

There are many balance sheet forms, the layout below acts as a quick reference, and sets out the most commonly encountered accounting terms when dealing with a business plan balance sheet forecast.

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