In constructing a pro forma balance sheet,which of the following fills the role of being the "plug" figure to balance the balance sheet?
A)external financing
B)the change in retained earnings
C)accounts payable
D)accounts receivable

Question

Quizplus · Accepted Answer

External financing is the amount of funding that is required to fill any financial gaps that exist after forecasting the assets and liabilities of a company. Based on the projections of the company's operations and financials, if the assets exceed the liabilities, external financing may not be required. However, if the liabilities exceed the assets, external financing will be needed to balance the ledger. Therefore, external financing is the "plug" figure needed to balance the pro forma balance sheet.

In Constructing a Pro Forma Balance Sheet,which of the Following