Accounts and Finance
Step 5 Preparing Projections and Budgets


  1. Obtain Current Year and Last few years Profitability Statement
  2. Enquire About Current Loans and their Repayment Schedule and Ensure it matches with Current Profit and Loss/Balance Sheet
  3. Discuss With Management Or Sales Dept About Future Plan
  4. (Ask For Future Sales, Whether New Machines Installed, What will be their cost and installation charges ,Where Will Money Come From - Bank Loan On Own Money ,What will be Rate of interest on Bank Loan,In how much year it will be repaid)


Suppose Management Says that in future,Sales will Double

In this case


Treatment of Direct Income and Expenses

If Sale Double
Direct Income - Double
Purchase - Double
Direct Exp - Double
Opening Stock - Closing Stock Of Last Year
GP(Gross Profit) - Double
Closing Stock - Balance Figure

Treatment Of Indirect Expenses

Type of Expense How to Prepare

Actual Calculation as per Working Note

(Learn Loan Chart here)


Actual Calculation as per Working Note

(Learn Depreciation Chart here)

Selling Exp.  On Basis of Sales (Double in our case)
Expenses fixed as per Contract or Agreement As Per Agreement
Other Expense On Basis of 10%/15% Inflation
Tax Expense As per Current Tax Rate (30%)



Prepare projected P&L and Balance Sheet on the basis of following assumptions
Prepare working note for loan interest , Fd Interest and Depriciation

Year 1
Sales Double
Existing Loan Repaid In 5 Yrs(In 5 Equal Principal Instalments+Interest),installment paid in the beginning of the next year
Assume 15% Inflation

Year 2
Sale 40% Increase As Compared To Projected Year
Machine To Be Installed For Rs 2000
Installation Charges Of Rs 500
Machine Will Be Installed After 5 Months (By 30 Aug)
Loan To Be Taken From Pnb @ 10% Of 1500 (60% Of Cost Of Project) (Repayble In 3 Years)
Fd To Be Broken After 3 Months(By 30 June)
Capital Increase By 500
Balance From Cash & Bank
Assume 15% Inflation
Assume Depreciation Rate on Machine is 15%

How to Make Projected P& L/Budgets - Making Projected P&L


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CA Maninder Singh

CA Maninder Singh is a Chartered Accountant for the past 14 years. He also provides Accounts Tax GST Training in Delhi, Kerala and online.