Comparative Income Statement and Balance Sheet
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Comparative Income statement
This is a kind of financial statement which provides information about two or more financial years of the organization. The comparison of the information is being possible with the help of usage of the financial statements. It provides information regarding comparison of the balance sheet, income statement, and statement of changes in equity along with cash flow statement. The example of comparative income statement of the organization is being provided below.
Income Statement
The income statement is the statement which provides information regarding the level of income being generated by the organization over a particular period of time. The total gain or loss carried out by the organization in the income statement would be taken into consideration at a particular point of time. The comparative incomes and expenses of the organization are going to be reported in the form of equity capital and this is going to work well towards ensuring that, best results are being generated in the area of doing the tasks being assigned at a particular point of time.
|
$ |
$ |
Income |
|
94,600 |
Services rendered |
946,000 |
|
Expenses |
|
60,366 |
Salaries |
25,000 |
|
Telephone & internet |
6,500 |
|
Water & electricity |
16,000 |
|
Property rates and taxes |
1,000 |
|
Insurance |
7,300 |
|
Advertising costs |
1,000 |
|
Fuel |
2,500 |
|
Stationery |
412 |
|
Bank charges/interest paid |
|
|
Tax expense |
3,414 |
|
Net Profit |
|
30,820 |
Income Statement Example
Income statement question and answer
- Question: From the following trial balance of Scot & Web company, extracted after one year’s trading, prepare a multistage income statement for the year ended 31 December 2015.
Scott & Web Co – Trial Balance as on 31 December 2015
|
Dr. |
Cr. |
|
$ 000s |
$ 000s |
Sales |
|
18,462 |
Purchases |
14,629 |
|
Salaries |
2,150 |
|
Motor exp. |
520 |
|
Rent |
670 |
|
Insurance |
111 |
|
General exp. |
105 |
|
Premises |
1,500 |
|
Motor vehicles |
1,200 |
|
Debtors |
1,950 |
|
Creditors |
|
1,538 |
Bank |
1,654 |
|
Cash |
40 |
|
Drawings |
895 |
|
Capital |
|
5,424 |
|
25,424 |
25,424 |
|
|
|
Stock on 31st December 2015 was at the level of $2548
INCOME STATEMENT OF SCOTT & WEB FOR THE PERIOD ENDED 31 DEC 2015 |
2015 $ |
Gross sales |
18,462 |
(Less sales returns and allowances) |
0 |
Net Sales |
18,462 |
Beginning inventory |
0 |
Goods purchased or manufactured |
14,629 |
Total Goods Available |
14,629 |
(Less ending inventory) |
(2,548) |
Cost of Goods Sold |
12,081 |
Gross Profit (Loss) |
6,381 |
LESS EXPENSES |
|
Motor Expenses |
520 |
Insurance |
111 |
Rent |
670 |
Salaries and wages |
2,150 |
Other miscellaneous expenses |
|
Total Operating Expenses |
3,556 |
NET INCOME |
2825 |
Balance Sheet
This is a kind of financial statement which provides information about the financial position of the organization at a particular period of time. The balance sheet provides information about assets, liabilities, and capital of the organization. The assets and liabilities of the organization are being classified under the category of current and non-current assets of the organization.
The image provided below provides an example regarding the balance sheet of the organization.
Balance sheet question and Answer
Question: There are two formats of drawing a balance sheet; the vertical format and horizontal format. The vertical format below is recommended by AS 1. Below is the balance sheet of Scott & web Company as at 31 December 2015 using information provided in the trial balance above
Solution
SCOTT & WEB CO. BALANCE SHEET (STATEMENT OF FINANCIAL POSITION) AS AT 31 DECEMBER 2015
Assets |
2015 |
Current Assets |
$ |
|
Cash at bank |
|
Accounts receivable |
|
Inventory (closing stock) |
|
Cash in hand |
|
Total current assets |
Fixed (Long-Term) Assets |
|
|
Property, plant, and equipment |
|
Motor vehicles |
|
Total fixed assets |
Total Assets |
8,892 |
Liabilities and Owner's Equity |
|
Current Liabilities |
|
|
Accounts payable(creditors) |
|
Total current liabilities |
Long-Term Liabilities |
|
|
Long-term debt |
|
Total long-term liabilities |
Owner's Equity |
|
|
Owner's investment(Capital) |
|
Retained earnings (Net Income) |
|
LESS Drawings |
The difference in Income Statement and Balance Sheet
The income statement provides information about the income being generated by the organization over a particular period. The balance sheet of the organization provides information regarding the fact that, the organization identifies its financial position as on date. This is going to help in making sure that, proper results are being generated in the area of doing the tasks at a particular point in time.
In the case of the income statement, if the organization deducts the expenses being incurred by it from the income being earned then, it is a scenario that the organization will be in the position to have identification of its net profit. The balance sheet of the organization provides information regarding its net worth over a particular period of time so that, proper results are being generated.
Analysis of Comparative Financial Statements
Horizontal Analysis: This is a percentage based analysis wherein, the movements in related items of the organization are being taken into consideration and on the basis of the same, percentage items are being identified. The amount of increase or decrease is being identified. On the basis of comparison of items of two periods, the organization finds out whether it is being done well or not. The previous period is being taken into consideration at the first level before making the comparison. In the case of analysis and comparison of 3 periods, the first period in the list is being taken into consideration for doing the analysis.
Question on Horizontal Balance Sheet
LINCOLN INC.
BALANCE SHEET
AS AT DEC.31, 2003 AND 2002
|
2003 |
2002 |
ASSETS |
$.000's |
$.000's |
Current Assets |
550 |
533 |
Long-term investments |
95 |
178 |
Property, plant and equipment(net) |
445 |
470 |
Intangible assets |
50 |
50 |
Total assets |
1140 |
1,231 |
LIABILITIES |
|
|
Current liabilities |
210 |
243 |
Long-term liabilities |
100 |
200 |
Total liabilities |
310 |
443 |
STOCKHOLDERS EQUITY |
|
|
Preferred 6% stock, $100par |
150 |
150 |
Common stock, $10 par |
500 |
500 |
Retained earnings |
180 |
138 |
Total stockholders’ equity |
830 |
788 |
Total liabilities and stockholder’s equity |
1140 |
1,231 |
Solution
|
2003 |
2002 |
Change |
% |
|
$.000's |
$.000's |
Increase/(decrease) amount |
Percentage |
ASSETS |
A |
B |
C =A-B |
C/B*100% |
Current Assets |
550 |
533 |
17 |
3.2% |
Long-term investments |
95 |
178 |
(83) |
(46.5%) |
Property, plant, and equipment(net) |
445 |
470 |
(25) |
(5.4%) |
Intangible assets |
50 |
50 |
- |
|
Total assets |
1140 |
1,231 |
(91) |
(7.4%) |
LIABILITIES |
|
|
|
|
Current liabilities |
210 |
243 |
(33) |
(13.6%) |
Long-term liabilities |
100 |
200 |
(100) |
(50.0%) |
Total liabilities |
310 |
443 |
(133) |
(30.0%) |
STOCKHOLDERS EQUITY |
|
|
|
|
Preferred 6% stock, $100par |
150 |
150 |
- |
|
Common stock, $10 par |
500 |
500 |
- |
|
Retained earnings |
180 |
138 |
42 |
30.5 |
Total stockholders’ equity |
830 |
788 |
42 |
|
Total liabilities and stockholder’s equity |
1140 |
1,231 |
(91) |
(7.4%) |
Vertical Analysis
Vertical analysis is being termed as percentage analysis which provides the relationship between each of the components to the total of the single element. In case of the balance sheet, each of the statement is being stated as a percentage of another element and it helps in making sure that, the analysis is being carried out in a proper and appropriate way.
Example of Vertical Analysis
Common Size Statement
Common size statements are being expressed in terms of percentages. Here, the comparison is being carried out regarding comparison in individual businesses or one business to another business.
Example of Common Size Analysis
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On the basis of the above illustration, it is being identified that Lincoln Inc. has a slightly lower level of gross profit in comparison to Madison Company. Therefore, income from operations of Lincoln is 10.7% in comparison to 14.4% of net sales being generated by 3.7% at a particular point.
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