Pro Forma Income Statement Template [Excel]: Useful Tool for Your Accounting Process

Updated: June 5, 2024, first publication: February 7, 2022

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

In this article, we will unveil everything about this statement, from its definition to the secrets of how to create the perfect one.

And, last but not leats, we even have an Excel template for you!

Let’s begin, shall we? 👇

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What is a Pro Forma Income Statement?

Pro Forma Income Statement: Definition

Proforma accounts are historical financial statements of a company or group, restated to enhance comparability, often due to changes in scope, such as:

acquisitions,
sales,
or shifts in accounting methods.

A pro forma income statement represents a company's adjusted earnings, after removing certain financial data.

👉 In other words, it indicates what the company's profits could be if certain costs were eliminated.

Types of Pro Forma Income Statements

There are two kinds of pro forma income statements.

☝️ First, those that look to the past, hence the historical profits and losses.

✌️ Secondly, those that look to the future, hence the pro forma profits and losses), such as:

income statement projections,
cash flow statement,
balance sheet.

The income statement is combined with a balance sheet, and the company's income statement is the starting point in both cases.

Financial statements vs. Pro Forma Statements

Financial statements and pro forma statements serve different purposes in business analysis, and understanding the differences between these two types of statements is crucial for accurate financial planning and analysis.

Traditional financial statements provide a historical view of a company's financial performance based on actual transactions. This category includes:

income statements,
balance sheets,
and cash flow statements.

They offer a snapshot of the company's financial health at a specific time.

In contrast, pro forma statements are forward-looking documents. They project future income, expenses, and cash flows by adjusting historical data to reflect hypothetical scenarios, such as:

mergers,
acquisitions,
or new product launches.

Pro forma statements help businesses forecast potential financial outcomes and make informed strategic decisions.

What is the Purpose of a Pro Forma Income Statement?

Reasons for Creating Pro Forma Tax Returns

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

To show creditors or investors the potential earnings of the business.
To convince future employees of a company's long-term viability, which is especially important for startups and small businesses.
To project financial scenarios, such as large one-time purchases, to management.
To aid in decision-making when acquiring a business.

Standardizing Accounts and Facilitating Analysis

Whatever the situation, the pro forma income statement standardizes the presentation of accounts. A new report often details how these statements impact business decisions.

Pro forma income statement information allows for the measurement of the impact a financial transaction would have had on a company's historical financial statements if the transaction had occurred before its effective date.

Additionally, pro forma statements enable the restatement of financial elements to ensure consistency from one year to the next.

👉 This standardization facilitates analysis for investors who need to assess the future of a company based on comparable elements.

How to Create a Pro Forma Income Statement?

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 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.

Using a Software

Many accounting and financial software tools are designed to streamline the process of generating pro forma statements by automating:

calculations,
integrating data,
and providing templates.

These tools can help ensure accuracy, save time, and facilitate more comprehensive financial analysis.

Also, by using software, businesses can easily adjust variables and scenarios to forecast future financial outcomes, making it a valuable resource for strategic planning and decision-making.

Example of a Pro Forma Income Statement

Let's take the example of the owner of our widget seller's business who wants to look back at historical profits and losses.

☝️ The 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.

✌️ Then, 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