Common Size Statements ~ “s : Common Size statements are those in which individual figures are converted into percentages to some common base. Percentage of each individual item shows its relation to its respective total. This type of analysis is called Vertical Analysis since cach accounting variable ts analysed vertically. Common size statements may be prepared for balance sheet as well as statement of profit and loss. Common size statements comprise e following items {i) Absolute figures of individual items of Statement of Profit & Loss and Balance Sheet for two or more successive periods, and (ii) Percentage to some common base. Normally, the figure of revenue from operations is taken as a base for the Statement of Profit & Loss items and the total of assets or equity & liabilities is taken as a base for the Balance Sheet items. Purpose or Utility of Common Size Statements () To present the change in various items in relation to revenue from operations, total assets or total liabilities One of the major drawbacks of comparative financial statements is that they do not present the change in various items in relation to revenue from operations, total assets or total equity & liabilities. This drawback is removed through the preparation of common size latements, (ii) To establish a relationship : Over a period, a relationship is established between various items of the statement of profit & loss to revenue from operations and various items of balance sheet to total assets or total equity & liabilities. Significant conclusions can be drawn by studying the change in such a relationship. For example, if over the years it is established that cost of materials consumed constitute 40% of revenue from operations, an increase in this percentage will need immediate attention (iii) To provide for a common base for comparison Common size statements provide for a common base for comparison. Financial statements of different firms can be converted into uniform common-size format irrespective of the size of individual items, Hence, they facilitate the comparison of profitability and financial position of ‘two or more businesses over a period of time, wane wane Preparation of Common Size Balance Sheet Common Size Balance Sheet : inc Buse e maiseren G2 igh Gk peeets ot er be equal to 100 and figures are expressed as percentage each asset is expressed as percentage to lity is expressed as percentage to total equity i___COMMON SIZE Stay r EMEA, ‘changes in individual items of balance sheet. h the trend in various items of assets and liabilities. the relative financial soundness for dtTerent enterprs es belonging industry by preparing their common size balance sheets for dij en w To assess the financial strategy adopted by different enterprises be| longing ig the same industry. Form of Common Size Balance Sheet : The form of Common Size Balance Sheet consists of five columns, (@) First column for items of Balance Sheet. (i Second column for amounts of different items of assests and equity @ liabilities of previous year’s balance sheet. (iii) Third column for amounts of different items of assets and equity & liabilities of current year’s balance sheet. (i) Fourth column for percentage of different items of previous year’s assets and equity & liabilities to total assets/liabilities of previous year which are taken as 100, (») Fifth column for percentage of different items of current year’s assets and ; liabilities to total assets/liabilities of current year, which are taken as 100. Format of a Common Size Bal t (as per CBSE Circular No. 43 dated 2nd July, 2013 COMMON SIZE BALANCE SHEET as at 31st March, 2018 and 2019 nts | Percentage of Balance Sheet Total ©. 313.2018 313.2019 313.2018 31.3.2019 | eae % %[COMMON SIZE STATEMENTS 43 “Non-Current Assets 4a) Fixed Assets (i) Tangible Assets (ii) Intangible Assets (b) Non-current investments (©) Long-term loans and advances Current Assets (a) Current investments {B) Inventories (@) Trade Receivables (d) Cash and Cash Equivalents (e) Short-term loans and advances (A Other Current Assets TOTAL 00 iLLUSTRATION 1. Following information is related to Oxford Ltd ¢ in Lakh ~ Particulars 31,3.2019 313.2018 z z Equity Share Capital 16.00 16.00 Preference Share Capital 2.00 2.00 Reserves and Surplus 5.40 4.00 Non-Current Liabilities 14.40 14.00 Current Liabilities 720 4.00 ‘Non-Current Assets 30.60 28.00 14.40 12.00 ‘Current Assets You are required to prepare a Common Size Balance Sheet. SOLUTION : COMMON SIZE BALANCE SHEET 13,2018 and 31.3.2019 (® in Lakhs) as at 3, Absolute Amounts Percentage of Note Balance Sheet Total No. 7918 | 2019 | 2018 2019 z z % % 1 18.00 180045" ao) 4.00 54010 122 1400; 1440) 350) 2? 720 «10 45.00 100‘Working Notes : (1) Share Capital : 2018 Equity Share Capital 16.00 Preference Share Capital 2.00 18.00 (2) All percentages will be calculated on the basis of total of Balance Sheet. Hence, in 2018 percentages will be based on £40 Lakhs: in 2019 percentages will be based on %45 Lakhs. Thus, (I) Hp x 100 = 45% Gy 18 100 = 40% Gi) $x 100 = 10% S) 100 (ii) x 100 = 35% wi n and so on. ) TION 2° Following data is derived from the books of X Ltd | 313.2017 | 3h z ian 3,00,000 —oo '30,000 aa 1,00,000 a 190,000 [ 1,01,000 ‘You are required to prepare a Common Size Balance Sheet. X Ltd, COMMON SIZE BALANCE SHEET as at 31st March, 2016 and 20172,30,000 8,000 10,000 1.60 1.67 , 72,000 1,01,000 1440 16.83 (c) Trade Receivables 1,80,000 1,90,000 36.00 31.67 (d) Cash & Cash Equivalents 10,000 9,000 2.00 1.50 TOTAL 5,00,000 6,00,000 100.00 100.00 ILLUSTRATION 3. Prepare a common size Balance Sheet and comment on the financial position of G Ltd, and L Ltd. The Balance Sheet of G Ltd, and L Ltd. as at 31.3.2018 are given below: Particulars Note Glid | L. Ltd. No. z 3,00,000 4,00,000 L EQUITY AN LIABILITIES : (1) Shareholder’s Funds (2) Non-Current Liabilities 2,00,000 3,00,000 1,00,0p0, 50,000 G) Current Liabilities | 6,00,000 | 7,50,000 TOTAL ) Non-Current Assets ‘Tangible Assets ble Assets Assets TOTAL SOLUTION : COMMON SIZE BALANCE SHEET OF G LTD. AND L LTD. as at 313.201841.67 25.00 33.33 3,50,000/ 7,50,000 100) 100.00 6,00,000 Comments ; The following differences may be observed in the financial position ‘of both the companies on the basis of above common size balance sheets of G Ltd. and Ltd: 3 (B The short-term financial position of L Ltd. is definitely better as compared 0 G Lid, The current liabilities of L Ltd. are 6.67% of total funds invested — whereas a proportion of current assets in these funds is 46.67%. On the other _ hand, the current liabilities of G Ltd. are 16.67% of total funds and current assets are 33.33% of these funds. Thus, trade payables are more secured in Ltd. (ii) The long-term financial position also of L Ltd. is better than G Ltd. because Shareholder’s Funds are 53.33% of total funds in case of L Ltd. while itis 50% in G Ltd. (iii) G Ltd. has invested more (66.67% 53.33% by L Ltd. fen above are notin the syllabus, They are meant only Tor enriched Teaming. | ) in non-current assets as compared to an A common size Statement of Profit & a! Tevenue from operations is assumed to be expressed as percentage of revenue from ope Purpose or Utility of Common Size St Loss is a statement in which the figure of equal to 100 and all other figures are rations, tatement of Pyjudge the relative efficiency of cost items of the two or more g to the same industry. ‘of Common Size Statement of Profit & Loss : ‘The form of Common Size Statement of Profit & Loss consists of five columns : (i First Column for items of Statement of Profit and Loss. (i Second Column for amounts of different items (ce., Income/Expenses) of ‘Statement of Profit & Loss for the previous year. (iii) Third Column for amounts of different items (ie., Income/Expenses) of Statement of Profit & Loss for the current year. (iv) Fourth Column for percentage of different items of statement of profit & loss for the previous year to revenue from operations of the previous year, which are taken at 100. (») Fifth Column for percentage the current year to revenue taken at 100. of different items of statement of profit & loss for from operations of the current year, which are COMMON SIZE STATEMENT OF PROFIT & LOSS {or the year ended 31st March, 2018 and 2019 Absolute Amounts Percentage of Particulars Note Revenue from No. Operations 2017-18 2018-19 | 2017-18 2018-19 e : z z % % 100 100 1. Revenue from Operations IL. Add : Other Incomes MM, Total Revenue (1+ 11) eared TV. Less : Expenses : | Costof Materials Consumed | | Purchase of Stock in Trade in Inventories of Goods, work iea ene ee _ ILLUSTRATION 4. Following information is is derived from the books of Vasundhra Ltd. : 31.3.2019 | 3 z _ Revenue from Operations 12,00,000 Cost of Materials Consumed 6,60,000 Employee Benefit Expenses 1,20,000 Other Expenses 96,000 COMMON SIZE STATEMENT OF PROFIT & LOSS for the years ended 31st March 2018 and 2019 Absolute Amounts | Particulars Note $ No. |" 2017-18 | 2018-19 aa z z % 1. Revenue from Operations 10,00,000 12,00,000 100 IL Less : Expenses : ‘Cost of Materials Consumed 6,00,000 6,60,000 60") Employee Benefit Exp. 1,20,000 1,20,000 122) Other Expenses | 50,000 96,0005) Total Expenses | | 7,70,000 8,76,000. 7 “ML ott Tax) | | 2,30,000 3,24,000 23 All i eet Ps ae on the basis of Revenue from ‘Year 2017-18 Year 2018-19 4) 6,60,000_ 12,00,000 * 100 = 55venue from Operations Total Revenue 2 ses : } Cost of Materials Consumed 1,10,000 Other Expenses 5,000 Total Expenses 1,15,000 40,000 Tax You are required to prepare a common size Statement of Profit & Loss of for the year ended 31.3. 2018. Raj Ltd. COMMON SIZE STATEMENT OF PROFIT & LOSS for the year ended 313.2018 7 Particulars Note’ Absolute | Yoh | Wo. Amounts ‘Revenue : ae Operations a. z 1. Revenue from Operations 2,00,000 100 15,000 75 Il. Other Incomes Ill. Total Revenue (I + 11) 2,15,000, 107.5 Cost of Materials Consumed 110,000, 55 5,000OF PROFIT & LOSS d 2018 COMMON SIZE STATEMENT 0 for the years ended 31st March 2017 ana pa | ute Amounts _ Percentage of ia | Absolute Amo’ pe [No 391617 | 2017-18 2016-17208 . | z z % % ‘Revenue from Operations 20,00,000 25,00,000 100 100 AL. Other Incomes 1,00,000 1,00,000 5 E IIL, Total Revenue (I+ I) 21,00,000 26,00,000 105 104 Less : Expenses Cost of Materials Consumed 14,00,000 17,00,000 70 68 Finance Costs. 1,60,000 — 2,00,000 8 8 a : Expenses 1,40,000 1,00,000 x » - Expenses 17,00,000 20,00,000 85 0 Tax (I-IV) | 4,00,000 6,00,000 20 ss All Percentages will be calculated on the basis of Re Calculation of percentages is as follows : Note: (1) 100,000, venue from Operations 20,00,009 *!00 = 5% ) ax 100 = 4% 2) ee 100 = 70% = 68% 8) FH 100 = 2% © Fen. 100 = 8% and so on. : pee : The above statement Teveals the following : i ° fae rain ne er 2078 Taw materials. (ii) Total expenses have decreased from g: iis bas incensed fom 20% 1 24%. Ke may be eosceacy oe worked more efficiently in the year 2017-18 ae a " 3You are required to prepare a Common Size Statement ce Profit & Lo Tanushree Ltd. ATEMENT OF PROFIT & LOSS for the years “ended 31st March 2016 and 2017 Absolute Amounts Percentage of | Note | Revenue from No. oo ee Operations 2015-16 201617 | 15-16 | 2016-17 z z % J. Revenue from Operations 25,00,000 40,00,000 100 | 100 IL, Add : Other Income 50,000, 1,60,000 2 il. Total Revenue d+) 25,50,000 41,60,000 102) eee 5 ah ee WV. Less : Expenses | Purchase of Stock in Trade 18,50,000 33,60,000 14 84 Changes in Inventories 1,50,000 (2,00,000) | 6 (5) Other Expenses 1,00,000 | 1,20,000 | 4 AgaG ‘Total Expenses 2 V. Profit before’ phax (il — 2D: ILUSTRATION 8. From the following Statement of Profit and Loss of Sun Ltd., for the years ended 3st March, 2015 and 2016, prepare 2 Common Size Statement :id Loss Common Size Statement of Profit an ‘Ist March 2015 and 2016 _ . Absolute Amounts fo fi 2014-15 | i 96 © 014-15 2015-16 @ @) ; prank froco Operations 20,00,000 30,00,000 100 BTL Add: Other Incomes 4,00,009_3,60,000 20 IHL. Total Revenue from ‘Operations a+ 24,00,000- 33,60,000 120 12 IV. Less : Expenses 10,00,000- 12,00,000 50 oe Y. Profit before Tax (III - IV) 14,00,000, 21,60,000 70 n VI. Less : Income Tax 5,60,000, 10,80,000 28 36 VIL, Profit after Tax (V - VI) 840,009, 10,80,000 42 36a Note ¢ Figures of the year 2014-15 will be presented first in comparison to 2015-16. ‘Trend percentages are very useful in making comparative study of the financial statements fora number of years. These indicate the direction of movement over along time and help an analyst of financial statements to form an opinion as to whether favourable or unfavourable tendencies have developed. This helps in future forecasts of various items. .. or calculating trend percentages any year may be taken as the ‘base year’. Each Hem of base year is assumed to be equal to 100 and on that basis the percentage of each item of each year is calculated. For example ae 2014 2015 2016 2017 ym Operations 2,00,000 2,50,000 2, 000 Trend percentage assu- ee ee ming 2014 as base year 100 125 140 150 ‘Trend Percentages have been calculated as follows : . 2,50,000 2015 3 Fo gog * 100 = 125 2,80,000, 26: * 1 ~ 0 3,00 ote. 100COMPARATIVE BALANCE SHEETS. as at 31st March, 2017 Absolute Amounts Trend Percentages nt Assets 2014 += 2015 2016+ 2017-—«2014 2015 2016 2017 z x z z % % % % 1,00,000 1,25,000 1,40,000 1,50,000 100 125 140 150 50,000 60,000 75,000 1,00,000, 100 120 150, 200 “Cash and Cash ‘Equivalents 10,000 15,000, 25,000 20,000 250 200 ‘Other Current Assets 40,000, 30,000 60,000 50,000 150) 125 2,00,000 000 150 1a Q. 1. What are Common Size Statements? ‘Ans. Common size statements express all items of a financial statement as percentage of some common base such as revenue from operations for profit and loss statement and total assets for balance sheet. . 2. What is the meaning of Common Size Balance Sheet? ; ‘Ans. A common size balance sheet is a statement in which total of assets or equity & liabilities is assumed to be equal to 100 and all the figures are expressed as Percentage of the total. Q. 3. What is the meaning of Common Size Statement of Profit & Loss? statement in which the figure ‘A common size statement of Profit & Loss is as from operations is assumed to be equal to 100 and all other figures are ge of revenue from operations. Short ceca Questions _ (Questions Carrying 2 Marks)Size Balance Sheet? ‘What are its objectives? fit & Loss? What are its obje Sheet of a company for two of Profit & Loss for two years, Statement of P mon Size Statement of Pro ve a format of Common Size Balance : ‘a format of Common Size Statement {6 Take a few imaginary figures and prepare a & Loss for two years. 7. What is meant by Trend Percentage Common 5 Analysis? (Q. Nos ©. 1. Prepare Common Size Balance Sheet of Vishal Paper Ltd. from the following information Sa Seiler 31.3.2017 | 31320188 ee ‘ z z oom 21,00,000 21,00,000. ‘Reserves and Surplus ), 10,000 6,00,000 singe . Liabilities 24,45,000 20,40,000° iabilities 15,45,000 12,60,000 eo Assets 43,40,000 36,00,000 ‘urrent Assets 26,60,000 24,00,000 Aes, 3 7 3. 313.2017 Share Capital 7 on Reserves and Surplus = a Non Current Liabilities - a aie, 34 34.93 ‘Non Current Assets 2 =e Current Assets £9, a EE a 40 38 . 2, The following balane % ince sheets relate t eres Ch into common size balance sheet and interpret Eo ea a Camputett Livesey BALANCE SHEETS as at 3ist March Particulars - s 3 i Note | a 2017 | EQUITY AND LIABILI ea) | No. oo Shareholder's Funds | (a) Share Capital (6) Reserves and Surplus Iiee Carrrent Lapede Receivables ‘& Cash Equivalents n Current Liabilities “Trade Payables “Short term Provisions Fixed Assets ‘Non Current Investments 25 16.5 i 4 Inventory “Trade Receivables ‘Gash & Cash Equivalents ment on the financial position alance Sheet and comn td, as at 31.3.2018 are given Q. 3. Prepare a common siZ¢ Bi Ippid. and B Ltd. The Balance Sheets of A Lid. and B Lt below : Note Particulars No. Aude Bal |Note 2016-17 | 20153 No. 5 14,00,000 10,00,0 8,40,000 1,40,000 70,000 from Operations 2015-16 | 2016 "Cost of Materials Consumed 65% 60% Finance Costs 8% | 10% ‘Other Expenses 6% 5% Profit before Tax 21% 25% From the following Statement of Profit & Loss, prepare a Common Size ‘Statement of Profit & Loss of Jayant Ltd. for the year ended 31.3.2018 : Statement of Profit & Loss of Jayant Ltd. for the year ended 31.3.2018 ae Particulars Income Revenue from Operations Other Incomes. Total Revenue Expenses :Ltd. rs are obtained from the books of X a Common Size (9, 7.Following particule z Note. 3ist ie {3h No. 2018 \ z from Operations 60,00,000, of Stock in Trade 43,20,000 in Inventories 120,000 ner Incomes 1,50,000 Expenses 3,60,000° Statement of Profit & Loss You are required to prepareCOMMON SIZE STATEMEg, com ae 26,88,000) 24,69) my ( Finance Costs 1.51,200) 1,609) Other Expenses Income Tax (40%) % of Revenue from { Operations 1 2015 2016 ).60 075 Other Income 4.00 60.00 Finance Costs 0 400 Other Expenses i 36.75 Profit before Tax 22.05 Profit after Tax on taking year Calculate the trend percentages from the ending 2015 as the base year ; 018 Current Liabilities z 5,00,000 Short-term Borrowings — Trade Payables 600 te Other Current Liabilities oan 2018 [ 250 Short-term Borrowings 294 Trade Payables a 7 Other Current Liabilities 400 ; 300 Total From the following Balance Sh s 3 March, 201 prepare a common size Balance Sheet BALANCE SHEET as at 31st March, 20. Particulars Note 313.2017 1, EQUITY AND LIABILITIES : s (1) Shareholder’s Funds (@) Share Capital 0,000 (b) Reserves & Surplus ssries rand Cash Equivalents TOTAL (From C.B.SE. Guidance Notes) Share Capital 66.67%; Reserve & Surplus 10%; Non-Current Liabilities Liabilities 3.339%: Tangible Assets 66.67%; ‘Intangible Assets 3.33% Fes 20%; Cash & Cash Equiv lents 10%.] | 1. Prepare a Common Size Balance Sheet of X Ltd, from the following (@in Lakhs) tion E 313.2016 | 31.3.2015 Assets 28.80 22.80 rent Investments 1.80 1.20 41.40 36.00 30.00 30.00 12.00 7120 12.60 12.00 17.40 10.80 Tans. Year 2015 : Share 50%; 12%; Non-Current 20%; Current Liabilities 18%; 5 ‘urrent Investments ant Assets 38%. 2016 : Share Capital 17.59%: Current Liabilities 24.17 40%.) om the following information: tupon the changes 41.67%; Reserve & Surplus 16.66%; Non-Current 9%, Fixed ‘Assets 57.5% Investments 2.5%; ommon Size Balance Sheet prepare & Ce 17 [313‘Non Current Liabilities Trade Payables: ‘Short term Provisions Fixed Assets Inventories Trade Receivables Cash & Cash Equivalents Hint : Figures of 2017 will be presented first @. 13, Prepare a Common Size Statement of Profit & Loss of X Ltd. from the following information : Note No Revenue from Operations Cost of Materials Consumed Employee Benefit Expenses Other Expenses Cost of Materials Consumed Employee Benefit Expenses Other Expenses Total Expenses __Prfthefore Tax Q. 14. You are given the followi 313.2018 | 3 g a 18,00,000, 15, 10,86,300) 9, 2,75,760, 2, 45,000 | % of Revenue fi Operations _— rat Figures of the y' 15. Prepare a Common Size from Operations sof Stock in Trade ‘in Inventories Other Income Purchase of Stock in Trade ‘Changes in Inventories _ Other Expenses Profit before Tax "Profit after Tax Q. 16, Prepare a Common Siz: Lid, from the following information ear 2016-17 will be presented first. Statement of Profit & Loss from the following Note) 31.3.2018 | 313.2017 No ed 448,00,000 30,00,000 32,64,000 | 21,00,000 (192,000) (90,000) 3,36,000 1,50,000 72,000 60,000 % of Revenue from Operations 2016-17 | 2017-18 2 ba 70 68 @) @ 5 + 30 30.50 18 18.30 ment of Profit & Loss of Vinod Paper Mills (in Lakhs) Note] 313.2017 | 313.2016 — No.\ £ 25.& Loss from the foll Statement of Profit = F Note| 313.2017 003 No. oe 54,00,000 venue from Operations 35,10,000 ‘Purchase of Stock in Trade 1.08,000 Changes in Inventories 374,000) ‘Other Expenses 40% Income Tax i: oth oo F r Pro a % of Revenue from as [Ans. (roa x 2016 201 7 a ‘Purchase of Stock in Trade of 65 = ‘Changes in Inventories 6) 2 ‘Other Expenses a & < Profit before Tax 30 2a F Profit after Tax 19.5 16.2 © 18. From the following Statement of Profit & Loss of Star Ltd, for the year ended 31st March 2018, prepare a Common Size Statement of Profit & Loss: 7 Note 31308) |: oO ‘Revenue from Operations 20,00,000 Employee Benefit Expenses 10,00,000, pa eo) (From C.B.S.E. Guidance Note) oaParticulars Note | 313.2017 | 313.2016 No. UITY AND LIABILITIES : z LE hareholder’s Funds 8,00,000 | 4,00,000 on-Current Liabilities 5,00,000 | 2,00,000 3,00,000 | 2,00,000 TOTAL, 8,00,000 10,00,000 | 6,00,000 | 16,00,000 TOTAL. = (CB.S.E. 2018) ~~ Particulars older’s Funds ent LiabilitiesCash Equivalents TOTAL (CB.S.E. Sample Paper, 2019) | Note No. Missing Figures Questions figures i is in the following Common Size Statement of Profit ®‘giZE STATEMENTS. 4.25 COMMON SIZE STATEMENT OF PROFIT & LOSS” 7 for the years ended 31st March, 2018 and 2019 Particulars Note | Absolute Amounts | PeeCHOROSTRERIG Ne from Operations | 2017-18 | 2018-19 | 2017-18 | 201819 g z % % J, Revenue from Operations IL. Less ; Expenses Cost of Materials Consumed 20,000, 960,000, 45 48 Employee Benefit Expenses 10 8 Depreciation 6 Other Expenses 80,000 1,00,00¢ Total Expenses Ill, Profit before Tax (I~ 11) Less : Tax x 97,000 Profit after Tax Problem 2. Fill in the missing fig ( on Size Statement of Profit & Loss COMMON s F PE )Ss of Revenu from Operations I. Revenue from Operations TL. Other Income 60,000 ML. Total Revenue (1 + II) WV. Less : Expen: s Cost of Materials Consumed Other Expenses 50 2,10,000, 14 Total Expenses Profit before Tax (III — IV) a 7s Less : Tax a a Eo Profit air Tax 2 aeOF PROFIT & LOSS ended 31st ‘March, 2018 and 2019 7,20,000 | 9,60,000 1,60,000, 1,60,000 10 1,20,000 | 1,20,000) 7.5 80,000 1,00,000 80,000 | 13,40,000 1 5,20,000 6,60,000 2,08,000 2,97,000 “13 312,000 | 3,63,000 19.5 Working Note: (1) First of all, figure of Revenue from Operations will be found out It will be calculated on the basis of ‘Cost of Materials Consumed 2017-18 : 720,000 x 1%. = #16,00,000 100 2018-19 : 9,60,000 x75 = %20,00,000 Hint, First of Expenses all, figure of R i a ‘evenue from Operations will be calculated on the basis of