Question

Mustafa a friend of yours, plans to open a fashion boutique that will sell women’s clothing and accessories. He told you that he leafed through several books on how to prepare forecasts and pro forma financial statements but that the books were geared toward existing firms that have several years of historical financial statements on which to base their projections. If Mustafa asked for your advice about how to prepare financial statements along with pro forma and forecasts for a completely new women’s fashion boutique, what would you tell him?

Answer 1

Explanation:

Some of the suggestions that can be given to Mustafa for preparation of financial statement  would be;

Identify transactions

Record transactions in a journal

Posting of every transaction

Unadjusted trial balance

Balance worksheet

Adjusting journal entries

Steps for generating Pro farma sheets include;

Calculation of revenue projections of business.

Estimation of total liabilities, costs and cash flows

Prepare the chart of accounts from these