### Provisional Balance Sheet
A provisional balance sheet is an unaudited statement of a company’s financial position prepared based on past data, specifically for a period that has already concluded but has not yet been audited or finalized. It provides a snapshot of the company’s assets, liabilities, and equity as of a certain date when a finalized balance sheet is not yet available.
**Example:**
If your financial year ends on March 31, 2022, but the audited balance sheet for that date is not yet ready, you may provide a provisional balance sheet to banks or other institutions that require a financial statement. This provisional balance sheet is prepared using the most recent available data up to the specified date.
### Projected Balance Sheet
A projected balance sheet, also known as a pro forma balance sheet, estimates a company’s future financial position based on anticipated changes in assets, liabilities, and equity. It helps in understanding the expected financial status of the business at a future date, assisting in strategic planning and decision-making.
**Main Line Items on a Projected Balance Sheet:**
1. **Assets:**
– **Fixed Assets:** Machinery, equipment, real estate.
– **Tangible Assets:** Physical assets like office furniture, inventory.
– **Intangible Assets:** Intellectual property, patents, trademarks.
– **Operating Assets:** Cash, receivables, inventory.
– **Non-Operating Assets:** Investments, long-term assets.
2. **Liabilities:**
– **Current Liabilities:** Short-term debts, accounts payable, wages payable.
– **Long-Term Liabilities:** Mortgages, bonds payable, long-term loans.
3. **Equity:**
– Represents the residual interest in the assets of the company after deducting liabilities.
– **Calculation:** Equity = Total Assets – Total Liabilities.
– **Components:** Common stock, retained earnings, additional paid-in capital.
**Importance of Projected Balance Sheets:**
– **Strategic Planning:** Helps in planning long-term strategies, such as expansion, investment, or financing.
– **Financial Forecasting:** Provides insight into future financial conditions, aiding in budgeting and financial planning.
– **Investor Relations:** Useful for communicating financial expectations to potential investors or lenders.
– **Resource Allocation:** Assists in determining how to allocate resources effectively to achieve business goals.
### Estimated Balance Sheet
An estimated balance sheet is a projection of a company’s financial position for a period that has already begun but is not yet completed. It is based on projections and assumptions derived from past performance and current data to provide a forecast of the company’s financial status.
**Example:**
If you are seeking an extension of your credit limit or applying for a new loan, banks might request a balance sheet for the current financial year, which is still ongoing. In this case, you would provide an estimated balance sheet based on projections and trends from the past performance of the company.
### Differences Between Provisional, Projected, and Estimated Balance Sheets
– **Provisional Balance Sheet:** Based on actual past data for a period that is completed but not yet audited.
– **Estimated Balance Sheet:** Based on projections for a period that has started but not yet ended.
– **Projected Balance Sheet:** Based on projections for a future period that has not yet started.
Each type of balance sheet serves different purposes and helps in different aspects of financial planning and analysis.