Accountancy · Ch 4 — Analysis of Financial Statements
Comparative Statements
Comparative Statements
Comparative statements are a tool for side-by-side comparison of financial data across two periods. They present the Statement of Profit and Loss and the Balance Sheet with columns for the current year's figures, the previous year's figures, the absolute change (increase or decrease), and the percentage change. This layout makes it easy to see not just the balances at different dates, but also the direction and magnitude of changes in each item.
The purpose is to identify trends and shifts in performance indicators. By looking at the change columns, you can quickly spot which items grew, which shrank, and by how much — both in rupees and as a percentage. Because the comparison runs across time, comparative analysis is a form of horizontal analysis.
Steps to Prepare a Comparative Statement
The process is the same for both the Statement of Profit and Loss and the Balance Sheet.
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List absolute figures for two points in time (e.g., Year 1 and Year 2) in adjacent columns.
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Calculate the absolute change by subtracting the first year's figure from the second year's figure. Show an increase as a positive number (or with a
+sign) and a decrease in brackets (or with a–sign). Place this in a third column. -
Calculate the percentage change using this formula:
Percentage Change = (Absolute Increase or Decrease / First Year Absolute Figure) × 100
Place this result in a fourth column.
The standard format for a comparative statement is:
| Particulars | First Year (₹) | Second Year (₹) | Absolute Increase (+) or Decrease (–) (₹) | Percentage Increase (+) or Decrease (–) (%) |
|---|---|---|---|---|
| (Item 1) | ... | ... | ... | ... |
| (Item 2) | ... | ... | ... | ... |
Comparative Statement of Profit and Loss
This statement compares the revenues, expenses and profits of two accounting periods. The usual order is: Revenue from operations, add Other incomes to get Total Revenue, less Expenses to get Profit before tax, then less Tax to get Profit after tax. Each line carries its own absolute and percentage change.
A common mistake is to forget that the percentage change is calculated on the first year's figure, not the second year's. A fall in an item is shown in brackets in both change columns.
Comparative Balance Sheet
This statement compares the financial position (assets, liabilities and equity) at two different dates, following the standard Schedule III order:
- I. Equity and Liabilities: Shareholders' Funds (Share Capital, Reserves and Surplus), Non-current Liabilities, Current Liabilities.
- II. Assets: Non-current Assets (Tangible and Intangible Fixed Assets, Non-current Investments), Current Assets (Inventories, Cash and Cash Equivalents). …