ACCOUNTS PROJECT

BY: JENISH BHANUSHAL

TOPIC

Preparation of common size and comparative income statement and a balance sheet of a
company by taking into account its audited. Unaudited/imaginary financial result of two
consecutive quarters of an accounting year or of two consecutive accounting year.
• The comparison has to be made in the form of common-size and comparative income
statement and balance sheet
• The comparison could also be shown graphically and/or pictorially
 Acknowledgement
would like to express my sincere gratitude to my accounts teacher, Suchi desai, for their invaluable guidance and
support throughout the duration of this project. Their expertise, patience, and commitment to helping me
understand the complex world of accounting have been instrumental in the successful completion of this project. I
am truly thankful for their unwavering encouragement and dedication to my learning.

I would also like to extend my heartfelt thanks to my family members and friends for their unwavering support
and understanding during this project. Their encouragement, patience, and belief in my abilities have been a
constant source of motivation, and I am deeply appreciative of their role in my academic journey.
 COMPARATIVE-SIZE
STATEMENT

COMPARATIVE INCOME COMPARATIVE

STATEMENT BALANCE SHEET
 COMPARATIVE INCOME STATEMENT
A comparative income statement, also known as a comparative profit and loss statement, is a financial report used
in accounting to present a company's financial performance over multiple periods for comparison and analysis. It
provides a side-by-side comparison of a company's revenues, expenses, and net income (profit or loss) for two or
more accounting periods.

The primary purpose of a comparative income statement is to help stakeholders, such as investors, creditors,
management, and analysts, assess the company's financial performance and identify trends or changes in its
profitability over time. By presenting data for multiple periods, it allows for a better understanding of how the
company's financial performance has evolved.
 COMPONENTS OF A COMPARATIVE INCOME STATEMENT
1. Revenues: This section includes all the sales, fees, or other income generated by the company during the specified periods. Revenues are
typically broken down into various categories, such as sales of goods, services, interest income, and any other sources of revenue.

2. Expenses: The expenses section lists all the costs incurred by the company to generate its revenues. This can include items like cost of
goods sold (COGS), operating expenses, interest expenses, and income taxes. Expenses are categorized to provide a clear view of where
the company is incurring costs.

3. Gross Profit: Gross profit is calculated by subtracting the cost of goods sold (COGS) from total revenues. It represents the profit earned
from core business activities before considering operating expenses.

4. Operating Income (or Loss): Operating income is calculated by subtracting operating expenses from the gross profit. This figure shows the
profit or loss generated by the company's normal operations.

5. Net Income (or Net Loss): Net income is the bottom line and is calculated by subtracting all expenses, including interest and income taxes,
from total revenues. It represents the company's overall profit or loss for the specified periods.
 SIGNIFICANCE OF A COMPARATIVE INCOME STATEMENT
1. Performance Assessment: Comparative income statements allow stakeholders to assess how a company's financial
performance has changed over time. By comparing multiple periods, they can identify trends, whether the
company's profitability is improving or declining, and the impact of specific events or decisions.

2. Decision Making: Investors and creditors use comparative income statements to make informed decisions about
their investments or lending. Management uses them to evaluate the effectiveness of their strategies and make
necessary adjustments.

3. Historical Comparison: A comparative income statement helps in historical comparison, enabling a company to
evaluate its financial results against its previous performance and industry benchmarks.

4. Budgeting and Forecasting: Companies use historical comparative data to create budgets and forecasts, helping set
realistic financial goals and plan for future operations.
 LIMITATIONS OF COMPARATIVE STATEMENTS
1. Limited Time Frame: Comparative statements typically compare data for a relatively short time frame, such as year-to-year
or quarter-to-quarter. This may not capture longer-term trends or cyclical patterns, which could be relevant for certain
industries or businesses.

2. Seasonal Variations: Businesses with significant seasonal variations in their operations may not provide a clear picture of
their financial health through comparative statements alone. The financial performance in one period may not be
representative of the overall annual performance.

3. Inconsistent Accounting Policies: Changes in accounting policies and practices between the periods being compared can
distort the comparability of financial statements. When a company alters its accounting methods, it can be challenging to
make meaningful year-to-year comparisons.
4. External Factors: Comparative statements do not account for external economic factors, regulatory changes, or shifts in
market conditions that can significantly impact a company's financial performance. This makes it challenging to isolate the
effects of internal decisions from external forces.
5. Non-Financial Data: Comparative statements primarily focus on financial data, but they may not capture non-financial factors that
are equally important for understanding a company's overall performance, such as customer satisfaction, employee morale, or
environmental impact.

6. Incomplete Information: Comparative statements provide a snapshot of a company's financial performance, but they do not provide
a full context for decision-making. Users of financial statements may need to refer to additional reports, disclosures, and
accompanying notes for a more comprehensive understanding.

7. Manipulation and Window Dressing: Companies may engage in accounting practices designed to present a more favorable picture
of their financial performance. This can include shifting expenses or income between periods to create a more positive trend,
potentially misleading stakeholders.

8. Size and Scale Differences: Smaller and larger companies may have different financial structures, levels of debt, and operational
complexities. Comparing them directly through financial statements may not be entirely meaningful without considering these
differ
FORMAT OF COMPARATIVE INCOM STATEMENT
AUDITED COMPARATIVE INCOME STATEMENT
 COMPARATIVE BALANCE SHEET

A comparative balance sheet is a financial statement that provides a side-by-

side comparison of an entity's financial position at two or more specific points
in time, typically at the end of different reporting periods, such as years or
quarters. It is a valuable tool in accounting and financial reporting, allowing
stakeholders to assess changes in the company's financial health and to analyze
how its assets, liabilities, and equity have evolved over time.
 COMPONENTS OF A COMPARATIVE BALANCE SHEET
1. Assets: The assets section of a comparative balance sheet lists the resources owned by the entity. This includes items such as cash,
accounts receivable, inventory, property, plant, and equipment, investments, and intangible assets. Each asset category is presented
alongside its respective values for each period being compared.

2. Liabilities: In this section, the comparative balance sheet presents the entity's obligations or debts. Liabilities may include accounts
payable, loans, bonds, and other financial obligations. Similar to the assets section, liabilities are reported for each period.

3. Equity: Equity represents the residual interest in the assets of the entity after deducting its liabilities. The equity section includes items
like common stock, retained earnings, and additional paid-in capital. Changes in equity between the periods being compared are
highlighted.

4. Total Assets and Total Liabilities + Equity: The comparative balance sheet typically includes a summary of the total assets and the total
of the liabilities and equity for each period, ensuring that the fundamental accounting equation (Assets = Liabilities + Equity) holds true.
 SIGNIFICANCE OF COMPARATIVE BALANCE SHEET
1. Historical Comparison: Comparative balance sheets provide a historical perspective on an entity's financial position. By
comparing data from different reporting periods, stakeholders can assess how the company's financial position has changed over
time.

2. Financial Health Assessment: These statements help stakeholders evaluate the entity's overall financial health, liquidity, and
solvency. For example, changes in the ratio of current assets to current liabilities can indicate changes in short-term financial
stability.

3. Trend Analysis: Comparative balance sheets facilitate trend analysis, allowing stakeholders to identify trends in the composition
and size of assets, liabilities, and equity. This is especially useful for detecting shifts in the company's capital structure or changes
in its asset base.

4. Decision-Making: Investors, creditors, and management use comparative balance sheets to make informed decisions. For
investors and creditors, these statements help assess the entity's financial stability and creditworthiness. Management can use
them to evaluate the impact of strategic decisions on the company's financial position
 FORMAT OF COMPARATIVE BALANCE SHEET
CURRENT PREVIOUS ABSOUTE CHANGE PERCENTAGE
PARTICULAR NOTE
NO
YEAR YEAR C=A-B CHANGE
A B D=

I EQUITY AND LIABILITIES

A SHARE HOLDER FUNDS --- --- ---- ---
A SHARE CAPITAL
i Equity share capital --- --- --- ---
ii preference share capital
B Reserves and surplus
2 NON CURRENT LIABILITES --- ---- ---- ---
A Long-term borrowings
B Long-term provision --- --- ---- ---
3 CURRENT LIABILITES --- --- --- ---
A Short-term borrowings
B Trade payable --- --- ---- ----
C Short-term provisions
D Other current Liabilites
--- ---- ---- ---
TOTAL --- ---- ---- ---
PARTICULAR NOTE CURRENT PREVIOUS ABSOLUTE CHANGE PERCENTAGE CHANGE
NO
YEAR YEAR
C = A-B D=C/B x 100
A B
II ASSET
1 NON CURRENT ASSET
A) Property, plant and Intangible asset
i Property, plant and equipment
ii Intangible asset --- ---- -- ----
B)
C)
Non current Investments
Long-term Loans and Advances
--- ---- --- ----
--- --- --- ---
2 CURRENT ASSETS
a)
b)
Current Investments
Inventories
--- --- --- ----
c) Trade receivables --- --- --- ---
d)
e)
Cash and bank balance
Short-term Loans and advances
--- ---- --- ---
f) Other current assets ---- ---- --- ---
TOTAL ---- ---- ---- ----
AUDITED COMPARATIVE BALANCE SHEET
 COMMON-
SIZE
STATEMENT
COMMON-
COMMON- SIZE
SIZE INCOME BALANCE
STATEMENT SHEET
 COMMON-SIZE INCOME STATEMENT
• A common size income statement, also known as a vertical analysis income statement, is a
financial statement that presents the components of an income statement as a percentage of total
revenue. This format is widely used in accounting and financial analysis to provide a clear and
standardized view of a company's income statement, making it easier to compare and evaluate
the relative significance of different income and expense categories
 COMPONENTS OF COMMON-SIZE STATEMENT
1. Total Revenue: The top line of the common size income statement represents 100% of the company's revenue for the period.
2. Cost of Goods Sold (COGS): COGS is expressed as a percentage of total revenue and reflects the proportion of revenue that is
consumed by the direct costs of producing goods or services.
3. Gross Profit: Gross profit is calculated as a percentage of total revenue and represents the amount remaining after deducting
COGS.
4. Operating Expenses: Operating expenses, which include items like salaries, rent, marketing costs, and other overhead
expenses, are presented as a percentage of total revenue.
5. Operating Income (or Loss): This figure, often referred to as operating profit, represents the income generated from core
business operations, expressed as a percentage of total revenue.
6. Interest Expenses: The interest expenses are shown as a percentage of total revenue and reflect the cost of borrowing.
7. Income Tax Expense: Income tax expense is expressed as a percentage of total revenue and represents the portion of revenue
allocated for taxes.
8. Net Income (or Net Loss): Net income, which is the bottom line, represents the profit or loss for the period and is expressed as
a percentage of total revenue.
 SIGNIFICANCE OF COMMON-SIZE STATEMENT

1. Standardized Comparison: A common size income statement provides a standardized format that facilitates easy
comparison between different companies, industries, or reporting periods. This allows for a more meaningful analysis of
financial performance.

2. Component Analysis: Stakeholders can quickly identify the relative weight of each income and expense component in
relation to total revenue, helping them understand which items have the most significant impact on profitability.

3. Trend Analysis: Common size income statements are useful for tracking trends over time. By comparing multiple
periods, stakeholders can assess whether certain expense categories are increasing or decreasing as a percentage of
revenue.

4. Benchmarking: Analysts often use common size income statements to benchmark a company's financial performance
against industry averages or competitors, helping identify areas where the company may excel or require improvement.
 LIMITATION OF COMMON-SIZE INCOME STATEMENT
1. Simplification: Common size income statements simplify financial information by expressing all line items as a
percentage of total revenue. This simplification can obscure certain details and nuances within the income statement,
making it less suitable for a detailed analysis of specific components.

2. Loss of Absolute Values: By focusing on percentages, common size income statements do not provide the actual dollar
amounts, which are essential for understanding the magnitude of financial transactions.

3. Industry Variations: Different industries may have significantly different cost structures and revenue recognition practices.
Comparing common size income statements across industries can be misleading due to these variations.

4. Non-Standardized Reporting: While common size income statements help standardize comparisons to some extent,
companies may still use varying accounting methods and classifications of expenses. This can result in inconsistent
presentations even within the same industry.
 FORMAT OF COMMON-SIZE INCOME STATEMENT
PARTICULAR PREVIOUS CURRENT ABS--OLUTE PERCENTAG
YEAR YEAR CHANGE E CHANGE

I REVENUE FROM OPERATIOM --- ----- 100 100

II OTHER INCOME ----- ----- ------ ----
III TOTAL REVENUE (I+II) ----- --------- ------- ---------
IV EXPENSES:
Cost of material consumed ----- --- ---- ---
Purchase of stock-in trade ---- --- --- ----
Change in inventories of finished ---- ----- --- -----
Goods, work in progress --- ----- --- ----
Stock-in trade ------- ----- ---- -----
Employee benefits expenses ------ ----- ---- -----
Finance costs ------ ------ ---- ----
Depreciation and Amortisation ----- ----- ---- ----
Expenses ----- ----- --- ----
Other expenses ----- ----- --- ----
Total expenses ----- ---- ---- ----
V PROFIT BEFORE TAX ( III – IV) --- ---- ---- ----
VI TAX --- ---- --- ---
VII PROFIT AFTERT TAX ---- ---- ---- ----
AUDITED COMMON-SIZE INCOME STATEMENT
 COMMON-SIZE BALANCE SHEET

• A common size balance sheet, also known as a vertical analysis balance sheet, is a
financial statement presentation format that expresses the various components of a
company's balance sheet as a percentage of its total assets. It is a valuable tool in
accounting and financial analysis that provides a standardized and easily
comparable view of a company's financial position, allowing stakeholders to
assess the composition of assets and liabilities and their relative significance
within the balance sheet.
 COMPONENTS OF COMMON-SIZE BALANCE SHEET
1. Current Assets: This category includes items such as cash, accounts receivable, and inventory, expressed as a percentage of
total assets.
2. Non-Current Assets: Non-current assets encompass items like property, plant, and equipment, investments, and intangible
assets, presented as a percentage of total assets.
3. Total Assets: Total assets represent the top line of the common size balance sheet and are expressed as 100% of the
company's assets for the period.
4. Current Liabilities: Current liabilities, which typically include accounts payable, short-term debt, and other obligations due
within one year, are expressed as a percentage of total assets.
5. Non-Current Liabilities: Non-current liabilities include long-term debt, lease obligations, and other long-term obligations,
presented as a percentage of total assets.
6. Equity: Equity represents the residual interest in the assets after deducting liabilities, expressed as a percentage of total
assets.
7. Total Liabilities + Equity: The common size balance sheet often includes a summary line that represents the total of the
company's liabilities and equity as a percentage of total assets.
 SIGNIFICANCE OF COMMON-SIZE BALANCE SHEET
1. Standardized Comparison: Common size balance sheets provide a standardized format that facilitates easy comparison
between different companies, industries, or reporting periods. This format is particularly useful for comparing the
capital structure of companies.

2. Component Analysis: Stakeholders can quickly assess the relative weight of each asset and liability category in relation
to total assets, helping them understand the significance of different components within the balance sheet.

3. Trend Analysis: Common size balance sheets are helpful for tracking trends over time. By comparing multiple periods,
stakeholders can identify whether certain asset or liability categories are increasing or decreasing as a percentage of
total assets.

4. Benchmarking: Analysts often use common size balance sheets to benchmark a company's financial position against
industry averages or competitors, aiding in the assessment of a company's financial stability and leverage.
 LIMITATION OF COMMON-SIZE BALANCE SHEET
1. Simplification: Common size balance sheets simplify financial information by expressing all line items as a percentage
of total assets. This simplification can obscure certain details and nuances within the balance sheet, making it less
suitable for a detailed analysis of specific components.

2. Loss of Absolute Values: By focusing on percentages, common size balance sheets do not provide the actual dollar
amounts, which are essential for understanding the magnitude of assets and liabilities.

3. Industry Variations: Different industries may have significantly different asset compositions, debt structures, and capital
requirements. Comparing common size balance sheets across industries can be misleading due to these variations.

4. Non-Standardized Reporting: While common size balance sheets help standardize comparisons to some extent,
companies may still use varying accounting methods and classifications of assets and liabilities. This can result in
inconsistent presentations even within the same industry.
 FORMAT OF COMMON-SIZE BALANCE SHEET
ABSOLUTE AMOUNT PERCENTAGE OF BALANCE
SHEET
PARTICULAR NOTE
NO
FIGURE OF
CURRENT YEAR
FIGURE OF
PREVIOUS YEAR
CURRENT YEAR(%) PREVIOUS YEAR(%)

EQUITY AND LIABILITIES

A SHARE HOLDER FUNDS --- --- --- --
A SHARE CAPITAL ---- --- --- ---
i Equity share capital
ii preference share capital --- ---- --- --
B Reserves and surplus ---- --- --- ----
NON CURRENT LIABILITES ---- --- --- --
A Long-term borrowings -------- --- --- ---
B Long-term provision ---- --- --- ---
CURRENT LIABILITES
A Short-term borrowings ---- --- --- ---
B Trade payable --- --- --- ---
C Short-term provisions ---- --- --- ---
D Other current Liabilites --- --- --- ---
TOTAL ------ ----- 100 100
PARTICULAR NOTE
NO
FIGURE OF
CURRENT YEAR
FIGURE OF
PREVIOUS YEAR
CURRENT
YEAR(%)
PREVIOUS
YEAR(%)

II•ASSET
PARTICULAR
1 NON CURRENT ASSET
A) Property, plant and Intangible asset --- --- --- -----
i Property, plant and equipment
ii Intangible asset --- --- --- ----
B)
C)
Non current Investments
Long-term Loans and Advances
---- --- ---- ---
--- --- ---
2 CURRENT ASSETS
a)
b)
Current Investments
Inventories
--- --- --- ---
c) Trade receivables --- --- --- ----
d)
e)
Cash and bank balance
Short-term Loans and advances
--- --- ---- ---
f) Other current assets -- --- --- ---
TOTAL ---- ---- 100 100
AUDITED COMMON-SIZE BALANCE
 CONCLUSION

• In conclusion, Comparative Statements and Common Size Statements are essential tools for
financial analysis. They provide a framework for evaluating a company's financial performance,
identifying areas of improvement, and making informed decisions. As we continue to delve into
the world of finance and accounting, these tools will remain valuable assets in our toolkit for
understanding and managing financial data.
 BIBLIOGRAPHY

• WWW.WIKIPEDIA,CO,IN
• T.S. GREWAL’S MANAGEMENT ACCOUNTING