The First Step in Preparing a Pro Forma Income Statement

question 17

True/False

The first step in preparing a pro forma income statement is to separate fixed and variable costs. 

---

Definitions:

Allowance for Doubtful Accounts

An estimate of the amount of credit sales that are expected not to be collected.

Percent of Sales Method

A financial forecasting model that estimates changes in balance sheet accounts by using a fixed percentage of projected sales.

Uncollectible Expenses

Expenses recognized from debts or receivables that are deemed uncollectible and written off as a loss.

Credit Sales

Sales made on credit, allowing the customer to pay at a later date, typically generating accounts receivable.