Page 176 - DMGT202_COST_AND_MANAGEMENT_ACCOUNTING

Unit 10: Analysis of Financial Statements

10.3 Comparative Statements Notes

Comparative statements are the financial statements which follow a consistent format but which
cover different periods of time. Comparative statements are very useful for spotting trends.

Objectives of Comparative Financial Statements

1. Changes taken place in the financial performance are taken into consideration for further
analysis.

2. To reveal qualitative information about the firm in terms of solvency, liquidity profi tability
and so on are extracted from the analysis of fi nancial statements.
3. With reference to yester fi nancial data of the enterprise, the fi rm is facilitated to undergo
for the preparation of forecasting and planning.

The major part of financial statement analysis is mainly focused on the comparative analysis.
10.3.1 Comparative Balance Sheet

The first and foremost important step is to have the following information and should take
preparatory steps:
1. While preparing the comparative statement of balance sheet, the particulars for the fi nancial
factors are required.
2. The second most important for the preparation of the comparative balance sheet is yester

financial data extracted from the balance sheet or balance sheets.
3. The next most important requirement to have an effective comparison with the yester

financial data is current year information extracted from the balance sheet or balance sheet
of the fi rms.
4. After having been procured the financial data pertaining to various time periods are ready

for comparison; to determine or identify the level of increase or decrease taken place in the

financial position of the fi rms.
5. To determine the level of increase or decrease in financial position, the percentage analysis

to carried out in between them.

Example: From the following information, prepare comparative Balance Sheet of X Ltd.

Particulars 31st Mar, 2004 31st Mar, 2005
Equit share capital 50,00,000 50,00,000
Fixed assets 60,00,000 72,00,000
Reserves and surpluses 10,00,000 12,00,000
Investments 10,00,000 10,00,000
Long-term loans 30,00,000 30,00,000
Current assets 30,00,000 21,00,000
Current liabilities 10,00,000 11,00,000
Solution:
As the first step, we have to segregate the available information into two different categories, viz.

Assets and Liabilities.

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