C2-S1-COMPARATIVE & COMMON-SIZE STATEMENT: COMMON SIZE STATEMENTS Common-size Financial Statement is {Vertical Analysis) of Financial Statements in which amounts of individual items of Balance Sheet or Statement of Profit and Loss (or Income Statement) are written. These amounts are further converted into percentages to ajcommon base, Common base is Revenue from Operations, i.e, Net_Salés—fot Statement of Profit and Loss and Total Assets or Total of Equity and Liabilities for the Balance Sheet. The percentage so calculated can be compared with the corresponding percentages in other periods and meaningful conclusions can be drawn. In the words of Kohler, ” Common-size Statements are accounting statements expressed in percentage of some base rather than rupees” Common-size Statement may be prepared for intra-firm and inter-firm comparison Common-size Statements may be prepared for Balance Sheet as well as Income Statement. COMMON SIZE STATEMENT OF PROFIT AND LOSS (INCOME STATEMENT) In the Common-size Statement of Profit and Loss, Revenue from Operations (Net Sales) is taken as 100 and all amounts are expressed as percentage of Revenue from Operations (Net Sales). Common-size Statemen-OF Profit and Loss may be prepared for different periods of the firm or for same period of two firms. Objective of Common-size Statement of Profit and Loss (Income Statement) 7. To analyse change in individual items of Income Statement. '. To study the trend in different items of Incomes and Expenses. . To assess the efficiency. Preparation of Common-size Statement of Profit and Loss (Income Statement) First Column: In this column, the items of Statement of Profit and Loss, i.e., revenue and expenses are written. Second Column: In this column, Note Number given against the in the Statement of Profit and Loss is written. Third Column: In this column, amounts of previous year are written if the statement is prepared for different periods of the same firm. And, if the statement is prepared for two firms, amounts relating to the first firm (say, Firm X) are written. Fourth Column: In this column, amounts of current year are written if the statement is prepared for different periods of the same firm. And, if the statement is prepared for two firms, amounts relating to the other firm (say, Firm Y) are written. Fifth Column: In this column, percentage of different items of Statement of Profit and Loss of the previous year to Revenue from Operations, i.e., Net Sales (taken as 100) is written. And, if the statement is prepared for two firms, percentages relating to the first firm are written. Sixth Column: In this column, percentage relation of different items of Statement of Profit and Loss of the Current Year to Revenue from Operations, i.e., Net Sales, (taken as 100) is written. And, if the statement is prepared for two firms, percentages relating to the other firm are written. FORMAT OF COMMON-SIZE STATEMENT OF PROFIT AND LOSS (NCOME STATEMENT) COMMON SIZE STATEMENT OF PROFIT AND LOSS forthe eos ended. Patcias ‘hte hours |Peanagetereue fom Operations (Nt Sales) | Fuerte | Rovere Presta Coe er Pres er) Cure ea) | (7 ® ) 6 6 | |, Revenue rom Operations Net Sales) : | I, Other Income . I, Total Revenue +) W, Expenses (a Costof Materials Consumed (b) Purchases of Stockade (¢ Chagesninvertones crite Goods, Winer St ade (4 Employees Benet Expenses (¢ Fance Costs ()Degreciton and Aortaton Epes 9) Oe Experses ‘Total Expenses 1, Prof before Tax) Mh es Income ax VL Prot after ax (VV) (oP AM EEN CIA /- WO eee NON ESA NAA eax MOT} 21. Prepare Common-size Statement of Profit and Loss from the following Statement of Prot and Loss: Partclrs NoteNo. | Yeari@® 1 Income Revenue frm Operations (Net Sales) 400000 1. Expenses Purchases of tockinTade 900.000 ‘Change in inventois of Stock Trade ‘00000 Finance Costs 80.000 ther Expenses 90.000 Total 1M, Profit before Tax) 1 Less Tox ‘GOMMONSIZE STATEMENT OF PROFIT & LOSS FOR THE YEARS ENDED 8 PERCENTAGE OF ABSOLUTE AMOUNTS (RS) | evENUE FROM OPERATIONS () Note No. | Year (a) | YEAR) veari() | YEARI(6) 2) Particulars (1) Revenue from Operations HroTAL REVENUE () expenses Purchase of Stock in Trade Crange in inventories other Expenses TOTAL EXPENSES (1) JPROFIT BEFORE TAX (1-11) Less : Tax PROFIT AFTER TAX (Vv)