Pro forma income statement template [Excel]: Useful tool for your accounting process

By Nguyen Oanh
Published: 2/7/22
how-to backgroundPro forma income statement template [Excel]: Useful tool for your accounting process

Are you looking for a pro forma income statement template Excel for your business? Here we have all you need!

A pro forma income statement is a document that shows a company's adjusted income if certain financial entries have been removed in a period of time. Companies use it to see the real financial health on a monthly and annual basis.

In the following lines of this article, we will see the definition of the pro forma income statement, its purpose, how to create a pro forma statement. Especially, Appvizer has prepared for you a free pro forma income statement template Excel to download! Take your time to read.

What is a pro forma income statement?

Pro forma accounts refer to the historical financial statements of a company or a group, restated to allow their comparability, for example following changes in scope (acquisition, sale) or change in accounting methods.

A pro forma income statement represents a company's adjusted earnings after removing certain financial data. In other words, it is a means of indicating what the profits of the company could be if certain costs were eliminated.

What is the purpose of a pro forma income statement?

Pro forma tax returns are created by business owners, accountants, or outside consultants for the following reasons:

  • To show creditors or investors the potential earnings of the business,
  • Convincing future employees of a company's long-term viability (especially important for startup and small business),
  • Project financial scenarios, such as large one-time purchases, to management,
  • To help with decision-making when acquiring a business.

Whatever the situation, the pro forma income statement is there to standardize the presentation of the accounts. Pro forma income statement information makes it possible to measure the impact that a financial transaction (acquisition, etc.) would have had on the historical financial statements of a company if this transaction had occurred before its effective date of occurrence.

It makes it possible to restate the financial elements and to make them consistent from one year to the next. The objective is to facilitate the analysis of an investor seeking to assess the future of a company on the basis of comparable elements.

How do you create a pro forma income statement?

There are two kinds of pro forma income statements:

  • Those that look to the past (historical profits and losses)
  • Those that look to the future (pro forma profits and losses): income statement projections, cash flow statement, balance sheet. The income statement is used in combination with a balance sheet.

The company's income statement is the starting point in both cases. Let's take an example of the owner of our widget seller's business who wants to look back at historical profits and losses.

First step is to add the revenues and the expenses to the income statement for each quarter you want to calculate. List all costs (property rent, advertising, insurance to pay, …) you want to eliminate in the first row. Subtract these costs from the total of each income statement item in the second row. You will receive the net income at the end.

The last column is your pro forma, which shows you how much money you've made in the past. If you've never had any expenses related to widgets, this reflects the adjusted revenue of the business.

Download our pro forma income statement template in Excel format

Pro forma income statement template (Excel) to be used to request payment against the order. This special income statement allows the buyer to account for a cash outflow before receiving the invoice. As these statements are intended to be subject to scrutiny, the assumptions on which each prediction is based should be explained by way of notes in your business plan.

Here is the free pro forma income statement template for Excel that we have prepared for your business. 

An easily modifiable pro forma income statement template

Download

Income statement essential elements

An income statement contains two basic elements: revenues and expenses. A product corresponds to a receipt (sales), and an expense corresponds to the cost of goods sold or services.

Revenues

Income from the income statement is divided into operating income, financial income, and exceptional income.

  • Operating income: Proceeds from the sale of goods and services, reversals of provisions and depreciation, other operating income (grants, etc.).
  • Financial income: The discounts obtained, income from loans granted, income from equity securities, positive exchange differences.
  • Exceptional income: Tax refunds, penalties levied on sales regulations, capital gains on disposals of assets.

Cost of goods sold (COGS)

Expenses in the income statement are divided into operating expenses, financial expenses and exceptional expenses.

  • Operating expenses: Purchases of goods, supplies and raw materials, inventory variations, other charges (rental, maintenance and repair, miscellaneous costs, advertising, etc.), taxes and duties related to the operation, staff costs (salaries, social contributions, etc.), depreciation and operating provisions.
  • Financial expenses: bank interest, the discounts granted, depreciation and financial provisions, negative exchange differences.
  • Exceptional expenses: penalties and fines, grants awarded, tax reminders, capital losses on disposals of assets.

Net income

Net accounting income, or net income, is the amount of money a business has actually earned. It is made up of operating, financial and unexpected results, from which taxes must be deducted. Net income serves as the basis for calculating many ratios such as net earnings per share.

A positive net result is a profit that a company can distribute to shareholders in the form of dividends or set aside. A negative net result is a deficit that negatively impacts the reserve and the value of the company.

Key takeaway

You will need projections from all sections of the business to generate the prospective pro forma income statement, including estimated revenues from all sales channels and estimated costs for all operating expenses. You will only have a forecast instead of a comparison like previous profit and loss.

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