The Comparative Statements is the group account wise comparative study of the financial statements of the two or more years together i.e. balance sheet and profit and loss account.
What are Comparative statements?
The comparative statements are that statement which shows the comparison between the component of the financial statement of the business for the period of more the two years. The components of the two or more years are shown side by side on the same page and then calculate the change from the base year of all the elements. It is the tools for the analysis of the financial statements of the business.
Type of the comparative statements:
There can be two types of comparative statements which are shown as follows:
1. Intra-Firm Comparision:
When the comparative statement is prepared from the financial statements of the single firm for the period of two or more years then it is known as an intra-firm comparison of financial statements.
2. Inter-Firm Comparision:
When the comparative statement is prepared from the financial statements of the two of more firms for the same period then it is known as an inter-firm comparison of financial statements.
Statements included in the comparative statement:
The two types of financial statements are included in the process of the comparison of the financial statements. These both are explained as follows:
1. Balance Sheet:
The Balance Sheet is the statement showing the position of the assets and liabilities of the business in a particular accounting period. It is a list of balances of ledger account of assets, capital, and liabilities. The value of assets showing which we can realize from the market and The value of Liabilities shows which we have to pay in the future. Capital shows the amount invested by the owner into the business entity.
2. Profit and Loss Account:
Profit and loss account is the statement which shows all indirect expenses incurred and indirect revenue earned during the particular period. It is prepared to find out the Net Profit/loss of the business for the particular accounting period. It is calculated by deducting indirect expenses from the Gross Profit/Loss. and adding indirect income/revenue int the Gross Profit/Loss.
Net Profit/Loss = Gross Profit/Loss + Indirect Income – Indirect Expenses
- Indirect Income = Other incomes which are earned from Business other than the main operation of the business.
- Indirect Expense = All business expenses other than direct expenses.
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