Suppose Your Colleague Constructed a Pro Forma Balance Sheet and a Cash

question 24

Essay

Suppose your colleague constructed a pro forma balance sheet and a cash budget for your company for the same time period,and the external financing required from the pro forma forecast exceeded the cash deficit estimated on the cash budget.How would you interpret this result?

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Definitions:

Revenue Account Balance

The total amount of income generated from sales before any expenses are subtracted.

Expense Account Balance

The total amount recorded as expenditures by a company within a specific period, awaiting reimbursement or allocation.

Income Summary

A temporary account used in accounting to transfer revenues and expenses, summarizing the net income or loss for a period before transferring the balance to retained earnings.

Owner's Capital

The amount of equity in a company that is directly attributable to the owner(s), representing their stake in the company’s assets after liabilities have been subtracted.