Pro-forma financial statements are prepared using the information developed in the budget process. These statements reflect the results of operations and the financial position of the organization as if all actions planned in the budget had occurred. Many of the master budget components provide direct input to the pro-forma financial statements.
Required:
For each of the following components of the financial statements, indicate which pro-forma financial statement will show the item (Income Statement or Balance Sheet) and the budget(s) within the master budget where the item originated. Number 1 provides an example.
| | Financial Statement Component | Pro-forma Financial Statement | Budget(s) Where Items Originated |
| 1. | Revenue | Income statement | Sales budget |
| 2. | Selling expense | | |
| 3. | Accumulated depreciation | | |
| 4. | Bad debt expense | | |
| 5. | Short- or long-term debt | | |
| 6. | Cost of goods sold | | |
| 7. | Accrued expenses | | |
| 8. | Accounts payable | | |
| 9. | Interest expense | | |
| 10. | Raw materials inventory | | |
| 11. | Accounts receivable | | |
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