Ch 2Analysis of Financial Statement — Class 12 Fundamentals of Management Accounting, concept-first.

At the end of every accounting period a business must answer two plain questions: how much did we earn or lose during the period, and what do we own and owe at the end of it? The formal statements a f…

A complete set of financial statements for a business enterprise consists of three principal statements, each answering a different question, supported by the notes that explain them.

Financial statements are prepared not for the accountant who draws them up but for the many users who rely on them, and a good student must be able to state both what makes them valuable and where the…

A balance sheet that reports 'sundry debtors 3,00,000' or a profit and loss statement that reports 'net profit 2,50,000' states a fact, but a single fact in isolation says very little.

Different users analyse financial statements for different purposes, and the analysis is only as good as the raw statements it works upon — so its usefulness and its limits must both be understood.

Several tools are available for analysing financial statements. The Odisha +2 Commerce syllabus for this chapter concentrates on three of them — comparative statements, common-size statements and tren…

A comparative statement places the financial statements of two (or more) periods alongside one another and, for each item, shows the absolute change (the increase or decrease in rupees) and the percen…

A common-size statement expresses every item of a financial statement as a percentage of a common base, so that the internal composition of the statement stands out and firms of very different sizes c…

Trend analysis studies the movement of an item (or a few key items) over a run of several years, so that its long-run direction becomes clear.