comparative financial statements - YouTube

Hello learners. As we have discussed about common size statements in a previous video lecture.

We will be talking about comparative financial statements in this video.

comparative study of financial statements is the comparison of the financial statements of the business with the previous year's

financial statements. These are financial statements that cover a different time frame but are formatted in a manner that makes comparing line items for one

period to those of a different period an easy process. Now moving on to the features of comparative financial statements a comparative statement adds

meaning to the financial data it is used to effectively measure the conduct of the business activities it is used for intra form analysis and interfilm

analysis also. A comparative statement analysis indicates change in amount as well as change in percentage and lastly it is a popular tool for analysis by the

financial analyst. A comparative statement analysis cannot be used to compare more than two years of financial data. Comparative financial statement is

of two types that is comparative balance sheet and comparative income statement. Now what is a comparative balance sheet the comparative balance sheet shows the

different assets and liabilities of the firm on different dates to make comparison of balances from one date to another. The comparative balance sheet

has two columns for the data of original balance sheets third column is used to show change in figures it can be increase or decrease. Fourth column may

be added for giving percentages of increase or decrease. Now this analysis is also known as Horizontal analysis. There is an example given to us

from the falling balance sheets of amrit limited as 31st March 2014 and 15 prepare a comparative balance sheet. Now different values are given for 15 and 14

that is shareholders fund which includes share capital and reserves and surplus non current liabilities which includes long term borrowings current liabilities

which includes trade payables and on the other hand assets which includes non current assets and current assets and the total of both sides in 2015 is 55

lakh and in 2014 is 47 lakh now moving on to the solution which says comparative balance sheet of Amrit Limited as at March 31st 2014 and 15 now

we will start solving this question by writing equity and liabilities first and which includes shareholders funds. Now share capital and reserves and surplus

have been given as 15 lakh and 14 lakh for 2014 and 20 lakh and 13 lakh in 2015 now one lakh has been taken common from each and every value that is why despite of

writing 15 lakhs only 15 is written now how much is the increase the increases 20 lakh minus 15 lakhs which becomes 5 lakh now there is an increase that is

why it is written as a positive value now in order to calculate the percentage what we will do is we will divide 5 by 15 that is your base year and multiply

it with 100 percent the value becomes 33.33% and in case of reserves and surplus it became 13 from 14 that means it

decreased by 1 lakh. Now the decrease percentage will be 1 divided by 14 in 200 which becomes 7.1 4% and negative in case of non current liabilities which

includes long term borrowings that is 16 lakh and it increased to 19 lakh in 2015 so the increases of 3 lakh that is 19 lakh- 16lakh. so the percentage will be 3

divided by 16 multiplied by 100 which becomes 18.75 percent. Now the current liabilities includes trade payables which is 2 lakh + 3 lakh

increases 1 lakh. Now we will divide 1 lakh by 2 lakh and multiply it with 100 which gives 50 percent now the total of equity and liabilities will be 47 lakh

and 55 lakh. Percentage will be absolute increase or decrease will be 8 in + and percentage increase will be 8 divided by 47 multiplied by 100

which becomes 17 point zero two percent. Moving on to the assets side which includes non current assets such as fixed assets. Fixed assets have been

further classified into tangible and intangible assets the values are 15 lakh 20 lakh and in case of intangible asset it is 16 lakh 19 lakh. so the absolute

increases 5 lakh and 3 lakhs respectively for tangible and intangible assets. Percentage will be 5 divided by 15 multiplied by 100 which is 33.33% and

in case of intangible assets 3 lakhs divided by 16 lakh multiplied by 100 which is equal to 18.75 percent same is applicable to current

assets which is 14 lakh in 2014 and 13 lakh in 2015 and the last one is cash and cash equivalents that is 2 lakh and 3 lakh so

the total becomes 47 lakh and 55 lakh and the percentage change is 17.02 percent. After the example now we shall move to comparative income

statement the income statement provides the results of the operations of a

business. Important components of income statement are net sales, cost of goods sold, selling expenses, office expenses etc.

The figures of the above components are matched with their corresponding figures of previous years individually

and changes are noted the comparative income statement gives an idea of the progress of a business over a period of time. The changes in money value and

percentage can be determined to analyze the profitability of the business. Now let's have a look at an example of comparative income statement. From the

following statement of P&L account of madhu Company Limited prepare comparative statement of profit and loss for the year ended 31st March 2014 and

15 and the values are given as revenue from operations 16 lakh in 2013-14, 20 lakh in 2014-15 employee benefit expenses 8 lakh 10 lakh other expenses 2

lakh and one lakhh and at last the rate of Texas 40 percent. Now moving to the solution which says comparative statement of profit and loss of Madhu

Company Limited for the year ended 31st mar 2014 and 15. Now we will start with revenue from operations which was given as 16 lakh and 20 lakh. Now the absolute

increases 4 lakh that is 20 lakhs - 16 lakh. Now in order to calculate percentage increase we will divide 4 lakh by 16 lakh and

multiply it with 100. So the value becomes 25%. Now in the second stage we are supposed to subtract expenses now first one is employee benefit expenses

which is given as 8 lakh and 10 lakh the net changes 2 lakh which is positive. 2 lakhs divided by 8 lakh multiplied by 100 is equal to 25% and other expenses

are given as 2 lakh and one lakh. Now there is an absolute decrease of one lakh. So we will divide one lakh by 2 lakh and multiply it with 100 which gives 50% and

negative so at the end what we get is profit before tax and the value of profit before tax for 2013-14 is 6 lakh and for 1415 is 9 leg and again absolute

increases 3 lakh which is 3 lakh divided by 6 lakh multiplied by 100 which is equal to 50 percent. Now at the end we are supposed to subtract text from it

which is 40 percent now 40 percent of 6 lakh is 2 lakh forty thousand and 9 lkah is 3 lakhs sixty thousand. An increase in Texas is one leg twenty

thousand. percentages, 50 percent and at last what we get is profit after tax which is three lakh sixty thousand and five lakh forty thousand absolute

increases five lakh forty minus 3 lakh 60 which becomes and at the end what we get is profit after tax. In 2013-14 profit after taxes 3 lakhs sixty

thousand and in 2014-15 it is five lakh forty thousand at the end absolute increases 5 lakh forty thousand minus 3 lakhs sixty thousand which is equal to

one lakh eighty thousand dollars. At the end in order to calculate the percentage increase we will divide 1 lakh 80

thousand by three lakh 60,000 and multiply it with one hundred so percentage increase in profit after taxes 50%. Thank you.