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# CBSE Class 12 Accountancy Revision Notes for Tools for financial statement analysis of Chapter 12

## Revision Notes for CBSE Class 12 Accountancy Chapter 12 – Free PDF Download

Free PDF download of Class 12 Accountancy Chapter 12 -Tools for financial statement analysis Quick Revision Notes & Short Key-notes prepared by our expert Accountancy teachers from latest edition of CBSE(NCERT) books.

## Class 12 Accountancy Quick Revision notes Chapter 12 Tools for financial statement analysis

The various tools used for analysis of financial statements are :
Comparative Statement: Financial Statements of two years are compared and changes in absolute terms and in percentage terms are calculated. It is a form of Horizontal Analysis.
Common Size statement: Figures of Financial statements are converted it to percentage with respect to some common base.
In Common size Income Statement Sales/Revenue from Operations is taken is common base where as in Common size Balance Sheet Total assets or Total Equity and Liabilities are taken as common base.
Ratio Analysis: It is a technique of Study of relationship between various items in the Financial Statements.There are mainly four types of ratios-
1) liquidity ratio
2) solvency ratio
3) activity ratio
4) profitability ratio
Cash Flow Statement : It is a statement that shows the inflow and outflow of cash and cash equivalents during a particular period which helps in finding out the causes of changes in cash position between the two balance sheet dates.It is prepared under accounting standard 3

### Comparative Statements

It is a statement that shows changes in each item of the financial statement in absolute amount and in percentage, taking the amounts of the preceding as counting period as the base.
Types of Comparative Statements :
1. Comparative Balance Sheet; and
2. Comparative Statement of Profit and Loss.
Comparative Balance Sheet : It shows the increases and decreases in various items of assets, equity and liabilities in absolute term and in percentage term by taking the corresponding figures in the previous year’s balance sheet as a base.
Format for a Comparative Balance Sheet
Comparative Balance Sheet of ……… Ltd.
As at 31st March 2014 and 2015

 Particulars 2014Rs.  (previous year) 2015Rs  (current year). Absolute Change Rs.(current year- previous year) Percentage Change % 1. EQUITY AND LIABILITIES(1) Shareholders’ funds  (a) Share capital (b) Reserves and surplus (2) Non-current Liabilities (a) Long-term borrowings (b) Other Long term liabilities (c) Long-term provisions (3) Current liabilities (a) Short-term borrowings (b) Trade payables (c) Other Current liabilities (d) Short-term provisions Total II. ASSETS(1) Non-current assets  (a) Fixed assets (b) Non-current investments (c) Long-term loans and advances (2) Current Assets (a) Current investments (b) Inventories (c) Trade receivables (d) Cash and cash equivalents (e) Short term loans and advances (f) Other current assets Total

*Percentage change = absolute change/ previous year *100
for example –

 pariculars note no 2016 (A) 2017 (B) absolute changeC= B-A percentageC/A*100 share holder fund 500000 300000 200000 40 current liabilities 30000 20000 10000 50 total liabilities 530000 320000 210000 40.38 assets fixed assets 220000 200000 20000 9.09 current assets 310000 120000 190000 61.29 total assets 530000 320000 210000 40.38

COMPARATIVE STATEMENT OF PROFIT AND LOSS/COMPARATIVE INCOME STATEMENT
Comparative Income Statement: It shows the increases and decreases in various items of income Statement in absolute amount and in percentage amount by taking the corresponding figures in the previous year’s Income Statement as a base.
Format for a Comparative Statement of Profit and Loss
Comparative Statement of Profit and Loss

For the years ended on 31st March, 2014 and 2015

 Particulars 2014Rs.  (previous year) 2015Rs.  (current year) Absolute Change Rs.(current year- previous year) Percentage Change % I. Revenue form operationsII. Other Income  III. Total Revenue (I+II) IV. Expenses : a.Cost of Material consumed b.Purchases of Stock-in-Trade c.Changes in Inventories of Finished Goods, Work-in-progress and Stock-in-trade d.Employees Benefit Expenses e.Finance Cost f.Depreciation & Amortisation Expenses g.Other Expenses Total Expenses V. Profit before Tax (III-IV) Less : Income Tax VII. Profit after Tax

percentage = absolutechange/ previous year*100
Importance of Comparative Statement
To make the data simple and more understandable.
To indicate the trend with respect to the previous year.
To compare the firm performance with the performance of other firm in the same business.

 PARTICULARS 2016(A) 2017(B) ABSOLUTE CHANGE(B-A) PERCENTAGEC/A*100 revenue from operation 10,00,000 30,00,000 20,00,000 200 total income (A) 10,00,000 30,00,000 20,00,000 200 cost of production 2,00,000 3,00,000 1,00,000 50 other expenses 1,00,000 2,00,000 1,00,000 100 total expenses(B) 3,00,000 5,00,000 2,00,000 66.7 profit (A-B) 7,00,000 25,00,000 18,00,000 257.14 -TAX (1,00,000) (5,00,000) 4,00,000 400 PROFIT AFTER TAX 6,00,000 20,00,000 14,00,000 233.3

Common Size Statement
Common Size Financial Statements are the statements in which amounts of the various items of financial statements are converted into percentages to a common base.
Types of Common Size statements :
1. Common Size Balance sheet; and
2. Common Size Statement of Profit and Loss.
Common Size Balance sheet : It is a statement in which every item of assets, equity and liabilities is expressed as a percentage to the total of all assets or to the total of Equity and Liabilities.
Format for a Common Size Balance Sheet :
Common Size Balance Sheet of…………….Ltd.
As at 31st March, 2014 and 2015
note – all the items are divided by the total of balance sheet to calculate the percentage.

 pariculars note no 2016 (A) 2017 (B) PERCENTAGE 2016(divide by total 530000) percentage2017  (divide by total 320000) share holder fund 500000 300000 94.3 93.75 current liabilities 30000 20000 5.7 6.25 total liabilities 530000 320000 100 100 assets fixed assets 220000 200000 41.50 62.5 current assets 310000 120000 58.49 37.5 total assets 530000 320000 100 100

Common Size Income Statement or Statement of Profit and Loss: It is a statement in which every item of Statement of Profit and Loss is expressed as a percentage to the amount of Revenue from Operations.
Format for a Common Size Statement of Profit and Loss:
Common Size Statement of Profit and Loss
For the years ended on 31st March, 2014 and 2015

 Particulars Absolute Amounts Percentage of Revenue from operation (Net Sales) 2014 Rs. 2015 Rs. 2014 Rs. 2015 Rs. I. Revenue from operationsII. Add : Other Income  III. Total Revenue (I+II) IV. Expenses : a. Cost of Material consumed b. Purchases of Stock-in-Trade c.Changes in Inventories of Finished Goods, Work-in-progress and Stock-in-trade d. Employees Benefit Expenses e. Finance Cost f. Depreciation g. Other Expenses Total Expenses V. Profit before Tax (III-IV) Less : Income Tax VII. Profit after Tax

note- all the items are divided by revenue from operations of that year to calculate the percentages.

 PARTICULARS 2016(A) 2017(B) PERCENTAGE2016  (divide by 10,00,000) PERCENTAGE2017  (divide by 30,00,000) revenue from operation 10,00,000 30,00,000 100 100 total income (A) 10,00,000 30,00,000 100 100 cost of production 2,00,000 3,00,000 20 10 other expenses 1,00,000 2,00,000 10 6.67 total expenses(B) 3,00,000 5,00,000 30 16.67 profit (A-B) 7,00,000 25,00,000 70 83.3 -TAX (1,00,000) (5,00,000) 10 16.67 PROFIT AFTER TAX 6,00,000 20,00,000 60 66.67