COMPARATIVE STATEMENTS

sunandaC

New member
These statements are useful for financial analysis. Under this statement P& L A/c or Balance Sheet of two years of two years are compared to find out change in amount and percentage (%) change. Comparative statements are prepared in vertical form with four columns namely:

 Previous year amount
 Current year amount
 Change in amount
 % Change
 % Change = Change in amount X 100
Previous year amount
One final way of evaluating financial performance is to simply to compare financial statements from period to period and to compare financial statements with other companies. This can be facilitated by vertical and horizontal analysis.
These statements are useful for financial analysis. Under this statement P& L A/c or balance sheet of two years are compared to find out change in amount and percentage (%) change. Comparative statements are prepared in vertical form with four columns namely:

 Previous year amount
 Current year amount
 Change in amount
 % Change

ADVANTAGES

The advantages of comparative financial statements are as follows:
a) These statements are very useful to the financial analysts because they indicate the direction of the movement of the financial profitability, position and performance over the years
b) This statements can also be used to compare the position of the firm every month or every quarter Such comparisons facilitate identification of ‘trouble spots’ in a company’s working and taking corrective measures.
c) Comparative statements present a review of the past activities and their cumulative effect on the financial position of the concern.
d) Comparative statements enhance the usefulness of reports and bring out more clearly the nature of current changes affecting the enterprises.

DISADVANTAGES

a) Comparisons loose their purpose and significance and tend to mislead if the application of accounting principles over a period of time is not consistent.
b) Constant changes in price levels render accounting statements useless for comparisons.
c) Comparison between two successive accounting periods, a normal period following an abnormal period or vice- versa, will also prove to be a pointless analysis.
 

rosemarry2

MP Guru
These statements are useful for financial analysis. Under this statement P& L A/c or Balance Sheet of two years of two years are compared to find out change in amount and percentage (%) change. Comparative statements are prepared in vertical form with four columns namely:

 Previous year amount
 Current year amount
 Change in amount
 % Change
 % Change = Change in amount X 100
Previous year amount
One final way of evaluating financial performance is to simply to compare financial statements from period to period and to compare financial statements with other companies. This can be facilitated by vertical and horizontal analysis.
These statements are useful for financial analysis. Under this statement P& L A/c or balance sheet of two years are compared to find out change in amount and percentage (%) change. Comparative statements are prepared in vertical form with four columns namely:

 Previous year amount
 Current year amount
 Change in amount
 % Change

ADVANTAGES

The advantages of comparative financial statements are as follows:
a) These statements are very useful to the financial analysts because they indicate the direction of the movement of the financial profitability, position and performance over the years
b) This statements can also be used to compare the position of the firm every month or every quarter Such comparisons facilitate identification of ‘trouble spots’ in a company’s working and taking corrective measures.
c) Comparative statements present a review of the past activities and their cumulative effect on the financial position of the concern.
d) Comparative statements enhance the usefulness of reports and bring out more clearly the nature of current changes affecting the enterprises.

DISADVANTAGES

a) Comparisons loose their purpose and significance and tend to mislead if the application of accounting principles over a period of time is not consistent.
b) Constant changes in price levels render accounting statements useless for comparisons.
c) Comparison between two successive accounting periods, a normal period following an abnormal period or vice- versa, will also prove to be a pointless analysis.

Hello Sunanda,

Here I am sharing Notes on Analysis of Financial Statements, so please download and check it.
 

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