Accounting: Financial Statements Analysis: Comparative Balance Sheet (For CBSE, ICSE, IAS, NET, NRA 2022)

Doorsteptutor material for competitive exams is prepared by world's top subject experts: get questions, notes, tests, video lectures and more- for all subjects of your exam.

Comparative Balance Sheet has three columns for Assets, Liabilities and Change (there can be fourth column to represent the change in percentage) to denote whether there is increase or decrease. This comparative analysis helps in identifying

  • Current liquidity – by examining working capital in both the years.
  • Financial position – by examining short term and long -term asset and liabilities of the company.

Example: The following is the Balance Sheets of MS Gupta for the years 2006 and 2007. Prepare the comparative Balance Sheet and study the financial position of the concern.

Balance Sheet as on 31st December

Solution:

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

Table Supporting: Accounting: Financial Statements Analysis: Comparative Balance Sheet
Year ending on 31st DecIncrease/Decrease

(Amount ₹)

Increase/Decrease

(Percentage)

20062007
ASSETS:

I Current Assets

Cash in hand

Bills Receivables

Sundry Debtors

Stock

Prepaid Expenses

Total Current Assets

II Fixed Assets

Land & Building

Plant & Machinery

Furniture

Other Fixed Assets

Total Fixed Assets

Total Assets

Liabilities & Capital:

I Current Liabilities

Bills payable

Sundry Creditors

Other Current liabilities

Total Current Liabilities

II Long-term Liabilities

Debentures

Long term loan on mortgage

Total Long-term liabilities

Total Liabilities

III Capital

Equity Share capital

Reserves & Surplus

Total Owned equities

Total Capital & Liabilities

20000

100000

200000

250000

40000

80000

250000

350000

2000

+ 20000

-20000

+ 50000

+ 100000

+ 2000

+ 100

-20

+ 25

+ 40

+ 100

570000722000+ 152000+ 26.67
270000

400000

20000

25000

170000

600000

25000

30000

-100000

+ 200000

+ 5000

+ 5000

-37.03

+ 50

+ 25

+ 20

715000825000+ 110000+ 13.49
12850001547000+ 262000+ 20.39
50000

100000

5000

45000

120000

10000

-5000

+ 20000

+ 5000

-10

+ 20

+ 100

155000

200000

100000

175000

300000

150000

+ 20000

+ 100000

+ 50000

+ 12.9

+ 50

+ 50

300000450000+ 150000+ 50
455000625000+ 170000+ 37.36
500000

330000

830000

700000

222000

922000

+ 200000

-108000

+ 82000

+ 40

-32.73

+ 50

12850001547000+ 262000+ 20.39

Interpretation

  • The comparative balance sheet of the company reveals that during 2007 there has been an increase in fixed assets of 110,000 i.e.. 13.49 % . Long-term liabilities to outsiders have relatively increased by ₹ 150,000 and equity share capital has increased by ₹ 200000. This fact indicates that the policy of the company is to purchase fixed assets from the long-term sources of finance.
  • The current assets have increased by ₹ 152000 i.e.. 26.67 % and cash has increased by ₹ 20,000. The current liabilities have increased only by ₹ 20000 i.e.. 12.9 % . This further confirms that the company has used long-term finances even for the current assets resulting into an improvement in the liquidity position of the company.
  • Reserves and surplus have decreased from ₹ 330,000 to ₹ 222,000 i.e.. 32.73 % which shows that the company has utilized reserves and surplus for the payment of dividends to shareholders either in cash or by way of bonus.
  • The overall financial position of the company is satisfactory.

Developed by: