How are operating items projected on financial statements?

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How are operating items projected on financial statements?

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How are operating items projected on financial statements?

Explanation & AnswerSolution by a verified expert

Explanation

In case, a firm has changed its trend for projecting operating items, the change is incorporated while preparing projected financial statements otherwise the trend will remain the same as per the past year.
 
Operating line items are mostly projected as per the percentage of sales method that is, all line items are presented as percentage of sales in the current year. The percentage is then used to calculate the forecasted values of line items with the estimated future sales.
 
Operating line items includes:

Cost of production
Inventory
Accounts receivable
Accounts payable
Cash

Verified Answer

Operating items are projected in a financial statement on the basis of past and future expected trends unless the firm has accepted some change in trends.

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