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Comparative Statements and Common-Size Statements 5.1
5
C H A P T E R

Tools of Financial Statement Analysis

—Comparative Statements and

Common-Size Statements

MEANING OF KEY TERMS USED IN THE CHAPTER

1. Financial Statements These are the final accounts prepared at the end of the
accounting period and include Balance Sheet and Statement
of Profit & Loss along with Notes to Accounts.

2. Comparative Statement It is the statement prepared to compare individual items or
components of the financial statements of two or more years
of a company. The amount of each component of financial
statements is placed side by side and difference is ascertained,
which is shown as a percentage of the base year.
3. Comparative Balance Sheet It is the statement prepared to compare individual items
or components of Balance Sheet of two or more years of a
company.

4. Comparative Statement of It is the statement prepared to compare individual items or
Profit & Loss (Income components of Statement of Profit & Loss (Income
Statement) Statement) of two or more years of a company.

5. Common-size Statement It is the statement prepared to compare components of
financial statements (Balance Sheet and Statement of Profit &
Loss) of two years by converting them into percentages taking
a common base.

6. Common-size Statement of It is the statement prepared to compare components of
Profit & Loss (Income Statement of Profit & Loss of two years by converting them
Statement) into percentages taking a common base, i.e., Revenue
from Operations.

7. Common-size It is the statement prepared to compare components of Balance
Balance Sheet Sheet of two years by converting them into percentages
taking a common base, i.e., Total Assets or Total of Equity and
Liabilities.