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Entrepreneurial Planning — Entrepreneurship STD 12 Commerce — Question

CBSE BoardEnglish MediumSTD 12 CommerceEntrepreneurshipEntrepreneurial Planning3 Marks
Question
Which common techniques are required to calculate the forecasting income?
OR
Discuss how each item of income statement can be forecasted.
✓

Answer

In preparing the proforma income statement, forecasted sales for the month is calculated.Income and expenses are forecasted on the following basis:
  1. Sales (Revenue): It can be forecasted with the help of anyone of the following projection techniques:
  1. Sales can be projected by multiplying estimated units to be sold by their selling price.
  2. A more complex methodology would be working out the demand for the whole market and then estimating company's share out of it.
  1. Cost of goods sold: It can be projected as a percentage of sales based on historical e xperience or on the basis of direct unit production costs.
  2. Operating expenses: It might be projected as percentage of sales based on historical experience or budget targets.
  3. Non-operating income and expenses: They might be projected on the basis of loan taken, investments made or projected gains or losses that may arise from planned future disposal of assets.
  4. Income taxes: These taxes for each future period can be projected by multiplying the applicable corporate tax rate given the company's tax bracket by the projected profit before tax.

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