Comparative Income Statement Part 3

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Comparative Income statement has three columns two for years and last one for Change (there can be fourth column to represent the change in percentage). This comparative analysis helps in identifying

  • Operations of the business and operating profits

  • Changes in sales cost of goods sold, selling expenses and office expenses etc.

  • Changes in net profits

  • The progress of a business over a period of time

Example: The income statements of a concern are given for the year ending 31st December 2006 and 2007. Rearrange the figures in a comparative form and study the profitability of the concern.

Image of Comparative Income Statement

Image of Comparative Income Statement

Image of Comparative Income Statement

Solution:

Comparative Balance Sheet of MS Gupta for the year ending December 2006 and 2007

Table of Comparative Balance Sheet of MS Gupta for the Year Ending December 2006 and 2007
Title: Table of Comparative Balance Sheet of MS Gupta for the year ending December 2006 and 2007

Year ending on 31st Dec

Increase(+)/Decrease(-)

(Amount Rs.)

Increase/Decrease

(Percentage)

2006

2007

Net sales

Less Cost of goods sold

Gross Profit

Operating Expenses:

General & Admin.

Selling expenses

Total Operating Expenses

Operating profit

Less: Other deductions

Interest received

Net profit before tax

Less income tax

Net profit after tax

785000

450000

335000

70000

80000

150000

185000

25000

160000

70000

90000

900000

500000

400000

72000

90000

162000

238000

30000

208000

80000

128000

+115000

+50000

+65000

+2000

+10000

+12000

+53000

+5000

+48000

+10000

+38000

+14.56

+11.11

+19.40

+2.8

+12.5

+8.0

+28.65

+20

+30

+14.28

+42.22

Interpretation

  • The comparative income statement given above shows that there has been an increase in net sales of 14.65%. The cost of goods sold has increased by 11%. This has resulted in increase of gross profit by 19.4%.

  • Operating expenses have increased by 8%. The increase in gross profit is sufficient to cover the operating expenses. There is also an increase in net profit after tax of Rs 38000 i.e. 42.22%.

  • It is concluded from the above analysis that there is sufficient progress in the performance of the company and the overall profitability of the company is good.

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