Notes to the Financial Statements

NOTES TO THE FINANCIAL STATEMENTS:

Notes to the financial statements are developed for existing businesses as well as proposed businesses. The Notes summarize or explain specific areas of a company’s financial statements. The purpose of developing these notes is to reduce any confusion a reader may have when reading financial statements.

Most existing business owners have an accountant develop their notes when preparing the company’s financial statements. Aspiring entrepreneurs, on the other hand, who forecast their own financial statements, are required to develop their own notes. Such notes are called “Notes to the FORECASTED Financial Statements”. Notes to the Forecasted Financial Statements will be our main focus in this section.

Notes to the Forecasted Financial Statements summarize the “activities” and “assumptions” made in creating the forecasted financial statements. These Forecasted Notes will equip the readers (bankers, investors, and other readers) with the necessary information needed to understand and comprehend your forecasted financial statements. In other words, they alleviate any guessing or questions a reader may have when reading the financial section of the business plan.

NOTE: never, ever, ever, create the notes to the forecasted financial statements until you have” fully completed” all forecasted financial statements and analysis.

There is no set structure nor specific guideline that depict which topics should be included in the notes to the forecasted financial statements. Rather it’s left up to the individual to decide which item warrants a “note” and which item is considered self explanatory. 

The following links explain and provide an example for each note listed above. Each example (note) is independent of one another and should be treated as such. Following this section, you will find the complete “Notes to the Forecasted Financial Statements” for J&B Incorporated, Scholarship Information Services, and The Maple Syrup Company.

• Sales Forecast note to the financial statements
• Gross Margin Per Unit note to the financial statements
• Management & Staff note to the financial statements
• Office or Store Supplies note to the financial statements
• Bad Debt Expense note to the financial statements
• Marketing Breakdown note to the financial statements
• Income Tax Rate note to the financial statements
• Net Income after taxes note to the financial statements
• Accounts Receivable note to the financial statements
• Account Payable note to the financial statements
• Sales Tax note to the financial statements
• Personal Assets Invested by the Owner note
• Fixed Asset Purchases note to the financial statements
• Depreciation Rate & Expense note to the financial statements
• Inventory note to the financial statements
• Short-term Loans note to the financial statements
• Long-term Debt (mortgages) note to the financial statements
• Owner (s) Capital Account note to the financial statements
• Retained Earnings note to the financial statements

This concludes our discussion on possible notes to the forecasted financial statements. Below provides three examples of the “Notes to the Forecasted Financial Statements” section of a business plan. 

Examples of Notes to the Forecasted Financial Statements

J&B Incorporated
Scholarship Information Services
The Maple Syrup Company