Projected P & L

dear ram,

take sales & purchaes on estimation basis.

like on previous year data

take the debtors & creditors according to the % of sales & purchaes of last year..........

projected P&L is not audited one so don't worry and figures shud be taken on some basis(like % or ratio)

If trend is fluctuating then how we decide ratio??????

suppose in 1st year it is 100, 2nd year 90, 3rd year 110 then hw we assume

justtake it on prev year figures it will bw enough.....

it is a company who has a high turnover.  will it be enough to estimate just on 1 year basis???????

hi ram,

buddy first ask the client the purpose for which he wants to get the projection.then either ask the client the expected percentage by which sales is expected to increase. if he is not that much aware of accounts then you can increse the sales by 15-20 % depending upon your wish.Saloni is very correct regarding projections but these days making estimation wont be correct as due to recession in few years back has almost disturbed the patterns.(actually this the most favourate excuse among those who are into cases)

further increase the expenses accordingly that the net profit gets increased by 10-15%.dont touch fixed assets and show drawings in capital as per last year.increase debtors and creditors depending upon the cash the party wish to declare (considering last year balance)

These are very raw but preliminary points to be kept in mind.hope they will help you.

Expectation is always based on the clients projections (often presented in minutes of meetings held). Get the MIS prepared by the sales executives. You have the following options

1. Talk to management and get their expectations and views on the same.

2. Go through the trend of the company ( if any) - last 3 normal years trend preferred

3. Go through the market treand ( where the above is not possible)

4. Regression analysis (where there is no definite trend)

R/m cost and direct expenses is a % of the sales normally. If historical data does not suggest so, go for corelation analysis.

Take fixed expenses as fixed +/- inflation adjustment

Hope that this will be useful for all... Best of luck

Thanks 2 every1.......

See it depends on purpose. 

Mostly our clients ask us to prepare projected P&L for limit or loan.  In that case our 1st priority s'd be to make them so that our client can easily get the limit.

For e.g if we are looking for a limit of 5 L then atleast 70% of closing stock s'd be 5L and in the same way 1/10th sale or 2 month sale s'd be of  required limit. Some other ratios like current ratio and debt coverage ratio are also considered.

If it satisfies the above criteria then we check d previous year figures and increase all the things by some %.