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CHAPTER 8
FINANCIAL PLAN
Objectives:

1. To enable students to prepare relevant statement for the financial plan.
2. To enable students to develop the skills of preparing a financial plan.
3. To help students in evaluating the financial viability of the proposed business/project
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INTRODUCTION
The financial plan is the final step in the preparation of a business
plan.
It is the most crucial aspect of the business plan and involves
determining the total project cost, choice of sources of financing and
preparation of financial projections in term of pro forma statements,
which include cash flow, income statement and balance sheet.

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1. What is Financial Plan
A financial plan incorporates all financial data derived from the operation
budgets i.e. the marketing, production/operation and administration. The
financial information form the operating budgets is then translated or
transformed into a financial budget. Based on this financial data,
projections are then prepared via several pro forma statements, namely
cash flow, income (profit and loss) statement and balance sheet. These
pro forma statements are normally prepared for a minimum three-year
planning period.
The term pro forma statement, used in the context of planning, means a
projected statement of something that the entrepreneur estimates in
advance.
The pro forma cash flow statement, pro forma income statement, and pro
forma balance sheet, therefore, are projected statements that forecast the
financial condition of the business. These statements reflect estimated
values based on planning assumptions rather than actual events.

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Marketing Budget
Sales forecast
Cost of distribution
Promotional Costs
Entertainment allowances
Sales commission, etc
The relationship between Operating and Financial Budgets
Production/Operations Budget
Plant, machinery and
Equipment cost
Direct labour
Direct materials
Operations overheads, etc
Administrative Budget
Furniture, fixtures and fittings
Office equipment
Payroll
Other administration costs
Financial Budget
Project implementation costs
Source of financing
Cash flow statement
Income statement
Balance Sheet
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The Importance of a Financial Plan
1. To determine the size of investment i.e. the project implementation cost.
A financial plan should be able to determine the size of investment needed to start a new
business or project. It will summarize the cost of buying fixed assets, working capital
requirements as well as other expenditures required to implement the project.
2. To identify and propose the relevant sources of finance.
A financial plan should also include proposals on how the project implementation cost is to
be financed. The entrepreneur has to identify the relevant sources of finance as well as the
amount the can be secured from each source.
3. To ensure that the initial capital is sufficient.
It is very important for the entrepreneur to make sure that the initial capital is sufficient for
the project to take off. An under-capitalized project will pose too much risk in the
implementation process, as the project will run out of cash before it reaches its stabilization
stage.
4. To appraise the viability of the project before actual investment is committed.
The financial viability can be determined by performing several analyzes on the projected
financial statements, such as the financial ratio analysis.
5. To be use as a guideline for implementation
By having a financial plan, the entrepreneur is able to evaluate whether or not the project is
on course.
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The Process of Developing A Financial Plan
1. Gathering the Financial Input
The process of developing a financial plan for a specific project begins
with the accumulative of financial information from the marketing,
operation and administrative plans. The financial requirements for each
plan are presented in the form of budgets as operation budgets.
2. Preparing Project Implementation Cost
A project implementation cost schedule incorporates both long-term and
short-term expenditure needed to start a project. The purpose of
preparing the cost schedule is to determine the amount of initial
investment needed to launch a new project. Long term expenditure refers
to such expenditure as the procurement of plant, machinery, equipment,
vehicles and other fixed assets needed by the new business, Short-term
expenditure, such as payment of utilities, salaries and wages, factory
overheads, purchase of raw materials, represent the amount of initial
working capital required to finance the daily operation. The amount of
working capital is therefore dependent upon the period until the firm can
generate enough sales to cover its short-term expenditure.
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Components of Project Implementation Cost
The Project Implementation Cost is categorized into four (4) components:
1. Capital expenditure
2. Working capital requirement
3. Other expenditure
4. Contingency cost

1. Capital Expenditure
All long-term capital expenditure required is listed at cost (i.e. at current
market or purchase price). Examples of capital expenditure include
procurement of fixed assets such as land, building, machinery, equipment,
furniture, fixtures and fittings. Renovation cost can be capitalized as part of
capital expenditure if the amount incurred exceeds 10% of the building cost;
otherwise the amount will be treated as an expenses.
Procurement of fixed assets can be done in three ways; cash, hire purchase
or personal contribution. If the asset is bought with cash or hire purchase, the
cost price of the asset should be included in the project implementation cost
schedule. However, if the entrepreneur contributes the fixed assets, the
current market price of the assets should be taken into account.
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2. Working Capital requirements
The determination of the initial amount of working capital is based on the
length of time (months) needed by the firm to generate it s first sales
multiplied by the amount of monthly operating expenditure to cover
marketing, operation and administrative costs. For example, if the monthly
operating expenditure is calculated as RM25,000 per month and the length of
time needed by the firm to generate its first sales is two months, the initial
working capital requirement for that particular firm is RM50,000 (RM25,000 x
2 months).
3. Other Expenditure
The third component is made up of other expenditure such as a business
registration, licensing, insurance premium, road tax, stamp duties, legal and
professional fees, deposit (rental and utilities) etc. Such expenditure is
considered one-off costs or to be paid annually.
4. Contingency cost
The final component is the contingency allowance. This cost is added to the
total cost of the other three components based on a certain percentage
(between 5 to 10 percent). The reason for including contingency cost is to
take care of any variance of the actual form the budgeted expenditure.
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Example of Project Implementation Cost Schedule
Particular RM RM
Capital expenditure
Building (contributed by owner)
Machinery & Equipment
furniture & fixtures
van (hire purchase)
renovation
Working Capital
Administrative
Marketing
Operation
Pre-operational costs
Business registration
Deposits ( telephone, water, electricity)
Road Tax
Allowance for contingencies ( 2%x148,000)

45,000
20,000
6,000
50,000
5,000

6,000
8,500
5,000

1,500
800
200





126,000



19,500



2,500
Total cost 150,500
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Depreciation schedule for Fixed Assets.
In any business, purchasing fixed assets either with cash or hire purchase is
important in order to operate smoothly. Therefore, depreciation schedules for
each of the fixed assets (except land) either bought or contributed by the
entrepreneur have to be prepared. The recommended method to calculate the
annual depreciation charges is the Straight-line Method.
The following formula is used to calculate the annual depreciation charges:

Annual depreciation = Original Cost of Asset Scrap Value
Assets Economic Life

The economic life of an assets refers to the period (normally expressed in
number of years) whereby the assets can be economically used i.e. without
much maintenance or breakdowns. The scrap value is the estimated residual
value of an assets at the end of its economic life. For planning purpose, the
scrap value can be zero.
Example:
Annual depreciation (van) = RM25,000 RM0
5 years
= RM5,000
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Example: Table of Depreciation (Van)
Year Annual depreciation Accumulated Depreciation Book Value
0
1
2
3
4
5

5,000
5,000
5,000
5,000
5,000

5,000
10,000
15,000
20,000
25,000
25,000
20,000
15,000
10,000
5,000
0
Type of asset : Van
Original Cost : RM25,000
Economic Life : 5 years
Scrap value : RM0
Method : Straight-line
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3. Preparing the Sources of Finance Schedule
Sources of finance refers to the sources where funds to finance a
particular projects implementation costs can be secured. These can be
categorized into internal and external sources. The internal sources
mainly come in the form of equity contributions from the entrepreneurs.
These contribution can either be in the form of cash or assets. External
sources of finance are mainly derived from commercial banks, finance
institutions, and government agencies. It may come in the form of tem
loans, hire purchase or grants. The total amount of funds that has to be
sourced should equal the total project implementation cost calculated
earlier. This is to ensure that the project is fully funded and to avoid the
risks of under-financing.
Components of Sources of Finance Schedule
i. Internal Sources
- Equity contribution (cash and/or assets)
ii. External Sources
- Term loan
- Hire purchase
- Others
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i. Equity Contribution
The most common source of finance for new projects is the
entrepreneurs own equity contribution. The equity contribution can be in
the form of cash or assets.If the entrepreneur contributes his/her personal
assets to the business, the current market price of that particular asset in
included in the sources of finance schedule.
ii. Term Loan
This is a form of long term financing offered by most commercial banks.
The term loan can be used to finance fixed assets as well as working
capital requirements. The interest rate and the loan period depend on the
current interest rate and the amount of loan required respectively.
iii. Hire Purchase
Hire purchase is commonly used to finance transportation vehicles,
business premises and some machinery and equipment as listed in the
Hire Purchase Act.
iv. Other Sources
Other sources of finance may include government grants, personal
borrowings from individuals and companies.
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Example: Sources of Finance/Fund
Source RM
Equity contribution
Cash
Assets (vehicle-van)
External Sources
Term loan
Hire Purchase Finance

25,500
50,000

45,000
30,000
Total 150,500
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Amortization schedule for Term Loan and Hire Purchase
The term loan amortization schedules have to be prepared for both term
loan and hire purchase if those type of financing are used.The annual
payment to service the loans comprises the interest and principal payments.
The annual principal payment is derived by dividing the loan amount by the
period of financing.
The method of calculating interest payment for term loan is different from
that of hire purchase. For term loan, the interest rate is calculated based on
annual rest while for hire purchase it is calculated on a flat rate basis.
Term Loan
Annual payment of principal:
RM45,000/5 years = RM9,000
Interest payment:
Year 1: RM45,000 x 10% = RM4.500
Year 2: RM36,000 x 10% = RM3,600
Year 3: RM27,000 x 10% = RM2,700
Year 4: RM18,000 x 10% = RM1,800
Year 5: RM9,000 x 10% = RM900

Hire Purchase
Annual payment of principal:
RM20,000/5 years = RM4,000
Interest payment:
Year 1: RM20,000 x 8% = RM1,600
Year 2: RM20,000 x 8% = RM1,600
Year 3: RM20,000 x 8% = RM1,600
Year 4: RM20,000 x 8% = RM1,600
Year 5: RM20,000 x 8% = RM1,600

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Example: Loan Amortization Schedule
Year Interest Principal Payment Balance
0
1
2
3
4
5
0
4,500
3,600
2,700
1,800
900
0
9,000
9,000
9,000
9,000
9,000
0
13,500
12,600
11,700
10,800
9,900
45,000
36,000
27,000
18,000
9,000
0
Loan amount : RM 45,000
Loan period : 5 years
Interest rate : 10%
Method : Annual rest
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Example: Hire-Purchase Repayment Schedule
Year Interest Principal Payment Balance
0
1
2
3
4
5
0
1,600
1,600
1,600
1,600
1,600
0
4,000
4,000
4,000
4,000
4,000
0
5,600
5,600
5,600
5,600
5,600
20,000
16,000
12,000
8,000
4,000
0
Cost of asset : RM25,000
Down payment : RM 5,000
Loan amount : RM20,000
Loan period : 5 years
Interest rate : 8 %
Method : Flat rate (annually)
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4. Preparing the pro forma Cash Flow Statement
The pro forma cash flow statement is another important part of the financial
plan. Pro forma cash flow statement refers to the projected statement of
cash inflow and outflow throughout the planned period. Under normal
circumstances, the pro forma cash flow statement is prepared for three
consecutive years, detailed by month for the first year and by year for the
second and third years. The pro forma cash flow statement must be able to
show the following information:
I. Cash inflows the projected amount of cash flowing into the company.
ii. Cash outflows the projected amount of cash flowing out of the company.
iii. Cash deficit or surplus the difference between cash inflows and cash
outflow.
iv. Cash position the beginning and ending cash balances for a particular
period.


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Elements in the Cash Inflow
The cash inflow is generally made up of the following:
Equity contribution
Term loan
Cash sales
Collection of receivables
Sales of assets

Equity Contribution
The main source of cash inflow for any new business or project is the equity
contribution in terms of cash from the entrepreneur(s). It should be
emphasized that only the cash contribution is taken as cash inflow while
other contributions is kind or assets are not to be included. Equity
contributions in terms of cash can be in the form of cash capital contributed
by the entrepreneur or by individual partners ( in the case of sole
proprietorship or partnership entities) or in terms of charges fully subscribed
and paid by the shareholders ( in the case of private limited company).

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Term Loan
This is the expected of cash amount of loans to be secured from commercial
banks or government agencies. This loan is expected to be paid over
specific period of time and the rate of interest charged depends on the loan
agreement.
Cash Sales
Projected cash sales derived from the normal operation of the business is
one of the most important elements of cash inflow. The figures are derived
from the sales forecast. Only cash sales should be included as cash inflow.
Credit sales will only be included in the cash inflow as collection of
receivables where payments for the credit sales are expected to be received
by the company.
Collection of receivable
Collection of receivables is the amount collected from the credit sales
realized by the company. The pattern of payment received is very much
dependent on the term of credit sales formulated by the company. The
receivables are included in the cash inflow in the period where the payment
for the credit sales is received form the customers.

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Sales of assets
This element actually represents the proceeds realized from the disposal of
the companys assets. Generally, it is not a common element of cash inflow,
particularly, for the new business or project, but it is more relevant to the
existing business selling off part of its assets in order to finance a new
business or project.

Elements in the Cash Outflow
The cash outflow is generally made up of the following elements:
Operation expenditure
Marketing expenditure
Administrative expenditure
Term loan repayment
Hire purchase repayment
Purchase of fixed assets
Pre-operating expenditure
Payments for deposits
Miscellaneous expenditure
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Operations Expenditure
This is the expenditure (monthly, annually or one-off) identified in the
production or operation budget. It includes payment for direct materials,
inventories, direct labor and other overheads. Purchase of fixed assets
such as plant, machinery and equipment will be grouped together under the
element of purchase of fixed assets.
Marketing Expenditure
This the expenditure (monthly, annually, or one-off) identified in the
marketing budget such as payments for promotional expenditure,
entertainment allowance, sales commission and other marketing
expenditure. Salaries for marketing personnel are also considered as
marketing expenses and therefore should be included in the cash outflow.
Purchase of fixed assets such as delivery van and signboards will be
grouped together under the element or purchase of fixed assets.
Administrative Expenditure
This is the expenditure (monthly, annually, or one-off) identified in the
administrative budget such as payment of the salaries of the administrative
staff, office rentals, utilities, office supplies and other administrative
expenses. Purchase of fixed assets such as furniture, fittings and fixtures
and office equipments will be group together under the elements of
purchase of fixed assets.
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Term Loan Repayment
If the company plans to secure a term loan from commercial banks or
government agencies, the repayment (monthly or annually) of the term loan
will be included in the cash outflow. The repayment comprises two items;
payment of the principal and interest.
Hire Purchase Repayment
If the company plans to finance its purchase of fixed assets through a hire
purchase scheme, the down payment and the repayment (monthly or
annually) of the hire purchase will be included in the cash outflow. The
repayment also comprises two items; payment of the principal and the
interest.
Purchase of Fixed Assets
All fixed assets purchased under the operation budgets (except those
assets purchased through hire purchase and those contributed by the
entrepreneur) are included as cash outflow in the pro forma cash flow
statement. The original cost of those assets should be taken into account.
Pre-operational expenditure
This expenditure includes business registration and licenses, legal fees,
road tax and insurance etc. Some of this expenditure recur annually and
some are one-off expenditure.
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Payment of Deposits
Deposit may have to be paid to owners of premises or to the utility provider.
The payments are considered as one-off payments and can be claimed back
if the entrepreneurs give up the rented premises or no longer subscribes to
utility services.
Miscellaneous Expenses
These are expenses that cannot be directly categorized under any of the
above headings and are normally small in terms of value. Examples include
postage, taxi fares and other petty expenditure.
Cash Surplus or Deficit
The pro forma cash flow statement must be able to show whether the
business or project has a cash surplus or deficit at the end of the month or
year throughout the planned period. The business or project will have a cash
surplus when the total cash inflow for a particular month or year exceeds the
total cash outflow for that period. If the total cash outflow is greater than the
total cash inflow for the same period, the business or project is said to be in
cash deficit.
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Cash Position
The final component in the pro forma cash flow statement is the cash position.
The ending cash position is determined by adding the opening cash balance
to the cash surplus or by deducting the cash deficit from the opening cash
balance for that particular period depending whether there is a surplus or
deficit.

Ending cash balance = Beginning cash balance + surplus or (-) Deficit
The ending cash balance for a particular month or year will become the
beginning balance for the next consecutive month or year.

5. Preparing the Pro Forma Income Statement
The pro forma income statement shows the expected profit or loss of the
planned period, usually for three consecutive year.

Elements in the pro forma Income Statement
1. Cost of good manufactured
2. Gross Profit
3. Net Profit

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Calculating the Cost of Goods Manufactured
Cost of goods manufactured ( production costs) refers to the total
production cost involved in producing the finished goods. It includes all cost
such as direct materials, direct labor, manufacturing overheads and the
differential value between beginning and ending balances of the work-in-
progress (if any).
Direct Materials
Direct materials refers to the raw materials that are going to be processed
into finished goods. To manufacture a product, several raw materials need
to be combined and processed. For example, raw materials needed to
manufacture a piece of furniture are wood, screws and nails. The cost of
these materials represents an important component in the production cost
and will include transportation cost, import duties and other costs directly
related to the purchase of the raw materials.

Ram materials used:
Opening stock (beginning of year)
Add : Purchase of raw materials (for the year)
Less: Closing stock (end of year)
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Generally, for a newly established manufacturing concern, the opening
stock is nil. The purchase of raw materials for the whole year is added to
the opening stock to derive the raw materials available for manufacturing.
The amount of closing stock at the end of the year is deducted from the raw
materials available for manufacturing to get the exact cost of direct
materials used in that particular year. The closing stock will become the
opening stock for the next consecutive year.

Apart from direct materials, some indirect materials might be needed to
complete a particular product.
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Example : Calculation of Direct Materials

Opening stock ( beginning of the year)
Add : Purchase of raw materials ( for the year)
Raw materials available for the manufacturing
Less : Closing Stock (end of the year)
Cost of Direct materials
RM
0
36,000
36,000
3,000
30,000

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Direct Labor
Direct labor refer to the cost of wages paid to those personnel directly
involved in the manufacturing process, for example, machine operators and
assembly workers. The total cost of direct labor should also include
contributions to EPF and SOCSO.
Prime Cost
The total cost of direct materials and direct labor is known as prime costs.
Prime costs represent the main component of direct cost before the
manufacturing overheads are added to it in order to get the total
manufacturing cost.
Manufacturing Overheads
Manufacturing overheads refer to the indirect costs incurred indirectly in the
manufacturing process. It includes indirect materials, indirect labor, utilities,
factory insurance, maintenance and depreciation charges on the plant,
machinery and equipment.
Work-in-process
It is possible that by the end of the year there will be some products that are
not fully processed or completed. These unfinished stocks are known as
work-in-process, sometimes referred to as work-in-progress. The cost of
work-in-process is estimated by adding up the cost of direct materials, direct
labor and manufacturing overheads already incurred in producing the
unfinished product at the closing date.
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Example : Calculation of cost of Goods Manufactured
Raw material Used:
Opening stock (1/1)
Add : Purchase of raw materials
Raw materials available
Less : Closing stock (31/12)
Direct materials
Direct labor
Prime cost
Manufacturing overheads*
Work-in-progress
Add : work-progress (1/1)
Less : Work-in-progress (31/12)
Cost of good manufactured
(to be transferred to the trading account)
RM
0
36,000
36,000
3,000





0
0

RM




33,000
36,000
69,000
28,600


0
97,600
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Calculating the Gross Profit
Gross profit is the gross margin realized after deducting the cost of goods sold
from sales. It represents the amount of profit before deducting other operating
expenditure such as administration expenditure, marketing expenditure,
operations expenditure (for a trading entity), interest charges, depreciation
charges on fixed assets (except for a manufacturing concern) and other
miscellaneous expenditure incurred throughout the year in order to derive the
net profit before tax.
Sales
Sales or revenues refer to the sales forecast derived earlier in the marketing
plan. It is the total of forecasted cash and credit sales from each year
throughout the planned period.
Cost of goods sold
Cost of goods sold refers to the cost of producing or acquiring finished goods
for sale.
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Example : Calculation of Gross Profit (Manufacturing Entity)

SALES

COST OF GOOD SOLD:
Opening stock for finished goods (1/1)
Add : Cost of goods manufactured

Goods available for sale
Less : Closing stock for finished goods (31/12)

GROSS PROFIT

RM



0
97,000

97,000
3,000
RM
240,000






94,000

145,000
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Example : Calculation of Gross Profit (Trading Entity)

SALES

COST OF GOOD SOLD:
Opening Stock for finished goods (1/1)
Add : Purchase of finished goods

Goods available for sale
Less : Closing stock for finished goods (31/12)

GROSS PROFIT
RM



0
36,000

36,000
3,000
RM
240,000






33,000

207,000
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Calculating The Net Profit
Net profit (or net loss) is defined as the different between gross profit
and operation expenses for the planned period.

Operating expenses
These are the expenses incurred in the normal day-to-say operations of
the business. Administrative expenses include items such as payroll of
the administration personnel (inclusive EPF and SOCSO contributions),
administration overheads and office suppliers. Items such as sales
commission, entertainment allowance, promotional expenses etc. are
included under marketing expenses.Operations overheads are only
relevant to trading and service entities because manufacturing entities
have already included such expenditure in the calculation of cost of
good manufactured.
Net profit before tax
Net profit before tax is the total final element computed in the income
statement. The net profit for trading and manufacturing entities derived
after deducting operating expenses from the gross profit.
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Example : Income Statement for Manufacturing Company

SALES
COST OF GOODS SOLD:
Opening stock for finished goods (1/1)
Add : Cost of good manufactured
Good available for sale
Less : Closing stock for finished goods (31/12)
GROSS PROFIT
LESS : OPERATING EXPENSES
Administrative expenses
Marketing Interest:
Interest
Term loan
Hire purchase
Depreciation charges
Miscellaneous
Total operating expenses
NET PROFIT BEFORE TAX
RM


0
97,600
97,600
3,000


96,000
18,000

4,500
1,600
7,200
2,700


RM
240,000




94,600
145,400









30,000
15,400
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Example : Income Statement for Trading Company

SALES
COST OF GOOD SOLD:
Opening stock for finished goods (1/1)
Add : Purchase of finished goods
Goods available for sale
Less : Closing stock for finished goods (31/12)
GROSS PROFIT
LESS : OPERATING EXPENSES
Administrative
Marketing
Operations/Productions
Interest:
Term loan
Hire Purchase
Depreciation charge
Miscellaneous
Total operating expenses
NET PROFIT BEFORE TAX
RM


0
36,000
36,000
3,000


96,000
18,000
60,000

4,500
1,600
11,800
2,700
RM
240,000




33,000
207,000









194,600
12,400
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Example : Income Statement for Service Company

SALES
LESS : OPERATING EXPENSES
Administrative
Marketing
Operating/Production
Interest:
Term loan
Hire purchase
Depreciation charges
Miscellaneous
Total operating expenses
NET PROFIT BEFORE TAX
RM


96,000
18,000
96,000

4,500
1,600
11,800
2,700

RM
240,000









230,600
9,400
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6. Preparing the pro forma Balance Sheet
While the pro forma income statement shows the financial performance of the
company for the planned period, the pro forma balance sheet shows the
financial position of the company at a specific point in time in terms of assets
owned and how these assets are financed. The pro forma balance sheet is
prepared for a period of three years.
Elements of the pro forma Balance Sheet
The general elements of the pro forma balance sheet include:
i. Assets
ii. Owners equity
iii. Liabilities

i. Assets
Assets are the economic resources of a business that are expected to be of
benefit in the future. Assets reported in the balance sheet are generally
categorized into three types. They are fixed assets, current assets and other
assets.
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Fixed assets are long-term assets owned and usually held by the company to
produce products or services. These assets are not intended for sale in the
short term. Example of these assets include plant, machinery and equipment,
furniture, vehicle and fixtures & fittings. The value shown in the balance sheet
are the book value of those assets.
Current assets are short-term assets that can be converted into cash within a
year. Examples of these assets are cash, stock, work-in-progress, account
receivable and other short-term investments. The amount of cash is taken from
the year-end balances of the pro forma cash flow statement.
Other assets are assets that cannot be categorized under any of the above
categories. The most common examples of this type of assets are deposits
paid for rentals or for acquiring utility services from the respective providers.
The amount of deposits paid is derived form the pro forma cash flow statement.
The amount does not change as long as the company does not terminate the
lease or stop using the utilities.

PEN2073 ENTREPRENEURSHIP
41
ii. Owners Equity
Refer to the original capital contributions from the owners or shareholders in term of
cash or assets plus the accumulated amount of net profit. However, if the company
suffers a loss, the amount of loss will be deducted from the original equity
contribution. The amount of equity will increase if the company is making a profit and
it will be reduced if the company is making a loss at the end of the accounting period.
iii. Liabilities
Liabilities are the amounts owed by the company to outsiders. They are categorized
as a current liabilities and long term liabilities.
Current liabilities
Refer to the short-term obligations of the company that mature within a period of less
than a year. The most common forms of current liabilities are accounts payable and
accrued payment. Account payable refers to the payment owed to suppliers for
products purchased or services rendered while accrued payments refer to
expenditure already incurred in the period but which are yet to be paid.
Long-term liabilities
Refer to the long-term obligations of the company that mature in a period of more
than one year. They usually include long-term loans as well as hire purchase.

PEN2073 ENTREPRENEURSHIP
42
FIXED ASSETS
Land and building
Machinery and equipment
Furniture and fixtures
Renovation
Van
CURRENT ASSETS
Cash
Closing stock for raw materials
Closing stock for finished goods
OTHER ASSETS
Deposits
TOTAL ASSETS
EQUITY
Capital
Accumulated profit
CURRENT LIABILITIES
LONG-TERM LIABILITIES
Term loan
Hire purchase
TOTAL EQUITY AND LIABILITIES
RM
45,000
18,400
5,600
3,200
20,000

40,900
3,000
3,000




72,500
15,400


36,000
16,000
RM




92,200



46,900

800
139,900


87,900
0


52,000
139,900
PEN2073 ENTREPRENEURSHIP
43
FIXED ASSETS
Land and building
Machinery and equipment
Furniture and fixtures
Renovation
Van
CURRENT ASSETS
Cash
OTHER ASSETS
Deposits
TOTAL ASSETS
EQUITY
Capital
Accumulated profit
CURRENT LIABILITIES
LONG-TERM LIABILITIES
Term loan
Hire purchase
TOTAL EQUITY AND LIABILITIES
RM
45,000
18,400
5,600
3,200
20,000






72,500
9,400


36,000
16,000
RM




92,200

40,900


800
133,900

81,900
0


52,000
133,900
Example : Balance Sheet for a Service Company
PEN2073 ENTREPRENEURSHIP

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