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How to prepare Comparative Financial Statements?


Example: Prepare Comparative Balance Sheet of company ABC with the help of current year and previous year balance sheet.Find out the % increase or decrease in shareholders fund,current assets and current liabilities.
                                                 Balance Sheet as on December 2010
Liabilities
2010
2009
Assets
2010
2009
Share Capital
3,00,000
2,00,000
Land
6,00,000
5,80,000
6% preference share
70,000
1,00,000
Building
1,38,000
2,20,000
12% Debenture
4,60,000
5,00,000
Patent,trademark
2,50,000
1,00,000
Reserve and surplus
1,00,000
80,000
Machinery
80,000
70,000
Long term loan
1,10,000
1,00,000
Marketable securities
58,000
40,000
Creditors
50,000
40,000
Debtors
65,000
68,000
Outstanding expenses
6,000
10,000
Stock
50,000
42,000
Bills payable
15,000
12,000
Prepaid expense
30,000
35,000
Overdraft
14,000
10,000
Cash
9,000
7,000
Provision for tax
70,000
45,000



Provision for debt
65,000
50,000



Proposed dividend
20,000
15,000




12,80,000
11,62,000

12,80,000
11,62,000

Solution:

Particulars
2009
2010
Increase or decrease
% increase or decrease
Fixed Assets:




Land
5,80,000
6,00,000
20,000
3.45
Building
2,20,000
1,38,000
-82,000
-37.27
Patent,Trademark
1,00,000
2,50,000
1,50,000
150
Machinery
70,000
80,000
10,000
14.29
Total (A)
9,70,000
10,68,000
98,000
10.10
Investment (B)
-----
-----
----
-----
Working Capital (C):




Current Assets:




Debtors
68,000
65,000
-3000
-4.41
Stock
42,000
50,000
8,000
19.05
Prepaid expense
35,000
30,000
-5,000
-14.29
Marketable Securities
40,000
58,000
18,000
45
Cash
7,000
9,000
2,000
28.57
Total (D)
1,92,000
2,12,000
20,000
10.41
Current liabilities:




Creditors
40,000
50,000
10,000
25
Bills payable
12,000
15,000
3,000
25
Outstanding expenses
10,000
6,000
-4,000
-40
Overdraft
10,000
14,000
4,000
40
Provision for tax
45,000
70,000
25,000
55.55
Proposed dividend
15,000
20,000
5000
33.33
Provision for debt
50,000
65,000
15,000
30
Total (E)
1,82,000
2,40,000
58,000
31.87
Working Capital: (C = D-E)
10,000
-28,000
-38000
-380
Capital Employed (A+B+C)
9,80,000
10,40,000
60,000
6.12
Less: Long term debt:




Debenture
5,00,000
4,60,000
-40,000
8
Loan
1,00,000
1,10,000
10,000
10
Shareholders fund
3,80,000
4,70,000
90,000
23.68
Represented by-Share capital
2,00,000
3,00,000
1,00,000
50
6% preference share
1,00,000
70,000
-30,000
30
Reserve and surplus
80,000
1,00,000
20,000
25

Interpretation:
·         There is  23% increase in shareholders fund.
·         6% increase in capital employed in a company that include fixed assets,investments and working capital.
·         The current liabilities is around 21%more than current assets in comparison to previous year data.

Example: Prepare Comparative income statement of company X Ltd. with the help of following information:

Particulars
2008
2009
Gross sales
3,20,000
4,26,300
Sales return
1,10,200
90,000
Cost of goods sold
50,000
40,000
Office expense
36,000
43,000
Selling and distribution expenses
30,000
59,200
Commission received
10,000
13,200
Dividend received
8,000
11,000
Salary
18,000
26,000
Tax
30%
30%

Solution:

Particulars
2008
2009
Increase or decrease
% Increase or decrease
Gross sales
3,20,000
4,26,300
1,06,300
33.22
Less: Sales return
1,10,200
90,000
-20,200
18.33
Net sales
2,09,800
3,36,300
1,26,500
60.30
Less: Cost of goods sold
50,000
40,000
-10,000
20
Gross profit
1,59,800
2,96,300
1,36,500
85.42
Less: Operating expenses:




Office expense
36,000
43,000
7,000
19.44
Selling and distribution expenses
30,000
59,200
29,200
97.33
Salary
18,000
26,000
8,000
44.44
Total
84,000
1,28,200
44,200
52.62
Add: Operating income




Commission received
10,000
13,200
3,200
32
Dividend received
8,000
11,000
3,000
37.5
Total
18,000
24,200
6,200
34.44
Net profit before tax
93,800
1,92,300
98,500
105.01
Less: Tax @ 30%
28,140
57,690
29,550
150.01
Net profit after tax
65,660
1,34,610
68,950
105.01

Interpretation:
·         The net profit after tax increases by Rs.68,950. It means net profit increases by 105% from previous year.
·         The gross profit increases by 85% from previous year.
·         It also shows that tax payment does not affect more in company’s earnings.
·         The rate of operating expenses is more in comparison to previous year.i.e. operating expenses is 52%.
·         The rate of operating income is also increases but not as much higher than the rate of operating expenses.

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