TYPES OF COMPARATIVE FINANCIAL STATEMENTS


1.      Comparative Balance Sheet

2.      Comparative Income Statement

            It should be kept in mind that the financial statements which are being compared should be prepared on the basis of same principles and methods. It will bring uniformity among them, otherwise they will not be comparable. For example, calculation of depreciation, valuation of stock, etc.  should be done on the basis of same principles in each period.

Objectives/Significance of Comparative Statements

(1)     To simplify data

(2)     To make Inter-period / Inter-firm comparison

(3)     To indicate the trends of the business

(4)     To enable forecasting

(5)     To indicate the strengths and weaknesses of the firm

(6)     To compare the performance

(7)     To analyse expenses

(8)     To analyse profits

 

Types of Comparison of Financial Statements

            There are different ways to compare and analyse the financial statements of a firm, some important types of comparison are as follows:

(1)     Comparison with standard figures: In this type of comparison actual          figures are compared with standard or budgeted figures for the same period and the same firm.

(2)    Intra-firm comparison: In this type of comparison actual figures of one        period are compared with figures of another period for the same firm.

(3)    Inter-firm comparison: In this type of comparison actual figures of one        firm are compared with those of another standard firm belonging to the same industry.

(4)    Pattern comparison: In this type of comparison actual figures of one firm are compared with those of industry to which the firm belongs.