CBSE Class 12 Accountancy Financial Analysis And Tools For Financial Analysis Worksheet Set 3

Question 1. What is meant by financial statements analysis?
Answer: Financial statements analysis means studying and examining the financial statements of a company to understand its financial position, performance, and the changes that take place over time. It helps users like investors, creditors, and managers make informed decisions about the business based on the information shown in the balance sheet, income statement, and cash flow statement.
In simple words: Financial statements analysis means looking closely at a company's financial records to know how well it is doing, whether it is making money or losing money, and if it has enough cash to pay its bills.

Exam Tip: Always mention that this analysis helps different users (investors, creditors, management) understand the financial health and performance of the company.

Question 2. What is meant by Common Size Statements?
Answer: Common Size Statements are financial statements where each item is shown both as an absolute amount and as a percentage of a base figure. In a Common Size Income Statement, all items are shown as a percentage of Revenue from Operations. In a Common Size Balance Sheet, all items are shown as a percentage of Total Assets or Total Equity and Liabilities. This helps in comparing financial data across different periods or between different companies, even if their sizes are very different.
In simple words: Common Size Statements show each item as both a number and a percentage. This makes it easy to compare the statements of different years or different companies.

Exam Tip: Remember that in Common Size Statements, the base figure (Revenue from Operations or Total Assets) is always taken as 100%, and all other items are expressed as a percentage of this base.

Question 3. State any one objective of financial statement analysis.
Answer: One key objective of financial statement analysis is to evaluate the profitability and efficiency of the business. Financial analysis helps determine whether the company is earning adequate profits from its operations and making good use of its assets and resources. This information is vital for investors who want to know if their money will generate good returns, and for management who need to assess operational performance and make improvements where necessary.
In simple words: One objective is to find out if the company is making good profits and using its resources well.

Exam Tip: Other common objectives include assessing liquidity position, judging the ability to repay debts, and comparing performance across periods — mention any one clearly.

Question 4. Mention any two tools of financial analysis.
Answer: Two important tools of financial analysis are:
(i) Comparative Statements - These show the financial data for two or more periods side by side, along with absolute changes and percentage changes, making it easy to spot trends and compare performance over time.
(ii) Common Size Statements - These express each item in the financial statement as a percentage of a base figure, allowing comparison between companies of different sizes or between different years on a level playing field.
In simple words: Comparative Statements show numbers from different years next to each other. Common Size Statements show everything as a percentage so we can compare fairly.

Exam Tip: Other tools include Trend Analysis, Ratio Analysis, and Cash Flow Analysis — you may mention any two depending on your chapter coverage.

Question 5. State the interest of tax authorities in the analysis of financial statements.
Answer: Tax authorities have a keen interest in analyzing financial statements to verify that the company has reported its income correctly and paid the appropriate amount of taxes. They examine the financial data to check for any underreporting of income, inflated expenses, or other discrepancies that could reduce the tax liability. This analysis helps ensure that all businesses comply with tax laws and contribute their fair share to the government revenue. It also helps identify cases of tax evasion or fraud.
In simple words: Tax authorities look at financial statements to make sure companies report their true income and pay the right amount of tax without cheating.

Exam Tip: Always mention verification of income, compliance with tax laws, and detection of tax evasion as key interests of tax authorities.

Question 6. What is meant by 'Analysis of Financial Statements'? State any two objectives of such an analysis.
Answer: Analysis of Financial Statements means the systematic study and examination of the financial statements of a business to assess its financial position, profitability, efficiency, and growth. It involves comparing figures, calculating ratios, and looking at trends to draw meaningful conclusions about the business.

Two key objectives of financial statement analysis are:
(i) To assess the profitability and operational efficiency of the business - This involves examining how much profit the company earned from its operations, how well it utilized its assets, and whether it improved its performance over time.
(ii) To evaluate the solvency and liquidity position of the business - This involves checking whether the company has enough liquid assets to pay its short-term obligations and enough resources to meet its long-term debt commitments.
In simple words: Financial statement analysis means studying a company's financial records. Two purposes are: (1) to see if the company is making good profits, and (2) to check if the company can pay back what it owes.

Exam Tip: Always define the term first, then state any two clear objectives with brief explanations — examiners look for both understanding and clarity.

Question 7. One of the objectives of 'Financial Statements Analysis is to judge the ability of the firm to repay its debt and assessing the short-term as well as the long-term liquidity position of the firm.' State two more objectives of this analysis.
Answer: Two more key objectives of financial statement analysis are:
(i) To evaluate the profitability and operational efficiency of the firm - This means examining whether the company is earning satisfactory profits from its business operations, and whether it is making good use of its assets, capital, and other resources to generate these profits. Investors and management use this to judge if the business is performing well.
(ii) To help in comparison and benchmarking - This means comparing the financial performance of the company across different time periods (year-on-year) or comparing it with other companies in the same industry. This helps identify where the company stands relative to its competitors and whether its performance is improving or declining over time.
In simple words: (1) To find out if the company is making good profits and using its resources wisely. (2) To compare the company's performance with other companies or with its own past performance.

Exam Tip: Since the question already gives one objective about debt repayment and liquidity, make sure your two additional objectives are distinct and do not repeat the given one.

Question 8. Explain the importance of financial analysis.
Answer: Financial analysis is important for several reasons:
(i) Helps in decision-making - Financial analysis provides vital information that helps investors decide whether to invest in a company, helps creditors decide whether to lend money, and helps management take decisions about operations and resource allocation.
(ii) Enables comparison - It allows comparison of the company's performance across different years and with competing companies, helping identify trends and relative strengths and weaknesses.
(iii) Assesses financial health - It helps evaluate the company's profitability, liquidity, solvency, and efficiency, giving a comprehensive view of its financial condition.
(iv) Identifies problems early - By analyzing financial statements regularly, businesses can spot declining profits, rising expenses, or other problems early and take corrective action before they become serious.
(v) Builds confidence - Transparent financial analysis builds trust among stakeholders like investors, creditors, and customers who rely on this information to engage with the company.
In simple words: Financial analysis helps people decide if they should invest in or lend money to a company. It shows how well the company is doing, helps find problems early, and lets us compare companies fairly.

Exam Tip: Cover at least three to four points on importance — decision-making, comparison, assessment of financial health, and early problem identification are the main ones.

Question 9. Explain briefly the importance of financial analysis for (i) Financial Manager, and (ii) Top Management.
Answer: (i) For Financial Manager:
Financial analysis is crucial for financial managers because it gives them the information they need to manage the company's finances effectively. It helps them monitor cash flow, control expenses, plan for future funding needs, and make decisions about capital structure. By analyzing financial statements, financial managers can identify areas where money is being wasted, evaluate the return on investments, and plan strategies to improve financial performance and ensure the company remains solvent.

(ii) For Top Management:
For top management, financial analysis provides valuable insights into overall business performance and helps in strategic planning. It enables senior leaders to evaluate whether the company is meeting its goals, whether resources are being used efficiently, and where improvements are needed. Top management uses financial analysis to set objectives, allocate resources, make major investment decisions, and guide the company toward long-term growth and profitability. It also helps them report accurately to stakeholders and comply with regulatory requirements.
In simple words: (i) Financial managers use analysis to manage money, check spending, and decide how to finance the business. (ii) Top managers use it to see if the company is doing well, plan for the future, and make big decisions about where to put money.

Exam Tip: Make clear distinctions between the roles — financial managers focus on day-to-day financial management and tactical decisions, while top management focuses on strategic planning and overall direction.

Question 10. Prepare a Comparative Statement of Profit and Loss from the following information extracted from the Statement of Profit and Loss for the years ended 31st March, 2017 and 31st March, 2018:
 

Answer: First, we calculate the missing values:

For 2017-18:
Cost of Materials Consumed = Rs 4,40,000
Revenue from Operations = 400% of Rs 4,40,000 = Rs 17,60,000
Other Expenses = 30% of Rs 4,40,000 = Rs 1,32,000
Total Expenses = Rs 4,40,000 + Rs 1,32,000 = Rs 5,72,000
Profit before Tax = Rs 17,60,000 - Rs 5,72,000 = Rs 11,88,000
Tax (50%) = Rs 5,94,000
Profit after Tax = Rs 11,88,000 - Rs 5,94,000 = Rs 5,94,000

For 2016-17:
Cost of Materials Consumed = Rs 4,00,000
Revenue from Operations = 300% of Rs 4,00,000 = Rs 12,00,000
Other Expenses = 20% of Rs 4,00,000 = Rs 80,000
Total Expenses = Rs 4,00,000 + Rs 80,000 = Rs 4,80,000
Profit before Tax = Rs 12,00,000 - Rs 4,80,000 = Rs 7,20,000
Tax (50%) = Rs 3,60,000
Profit after Tax = Rs 7,20,000 - Rs 3,60,000 = Rs 3,60,000

In simple words: We first worked out the missing amounts using the percentages given. Then we made a table showing the amounts for both years, how much they changed, and what that change was as a percentage. The table shows that revenue grew by 46.67%, but profit after tax grew by 65%, which means the company improved its efficiency.

Exam Tip: Always show your calculation steps clearly, calculate all absolute changes (new year minus old year), and then calculate percentage change as (Absolute Change / Old Year Value) × 100. Round percentages to two decimal places.

Question 11. From the following Statement of Profit and Loss of Star Ltd. for the years ended 31st March 2011 and 2012, prepare a comparative Statement of Profit and Loss:
 

Answer: To prepare the comparative statement, we calculate the absolute change and percentage change for each item:

For Revenue from Operation:
Absolute Change = 20,00,000 - 16,00,000 = 4,00,000
Percentage Change = (4,00,000 / 16,00,000) × 100 = 25%

For Employee Benefits Expenses:
Absolute Change = 10,00,000 - 8,00,000 = 2,00,000
Percentage Change = (2,00,000 / 8,00,000) × 100 = 25%

For Other Expenses:
Absolute Change = 1,00,000 - 2,00,000 = (1,00,000) [This is a decrease]
Percentage Change = (-1,00,000 / 2,00,000) × 100 = -50%

Profit before Tax for 2012 = 20,00,000 - 10,00,000 - 1,00,000 = 9,00,000
Profit before Tax for 2011 = 16,00,000 - 8,00,000 - 2,00,000 = 6,00,000
Absolute Change in Profit before Tax = 9,00,000 - 6,00,000 = 3,00,000
Percentage Change = (3,00,000 / 6,00,000) × 100 = 50%

In simple words: Revenue went up by 25%, employee expenses also went up by 25%, but other expenses went down by 50%. Because expenses did not increase as much as revenue, the profit before tax went up by 50%.

Exam Tip: Always calculate profit before tax first by subtracting all expenses from revenue. Then calculate the absolute and percentage changes for each line. Show all calculations in your answer to earn full marks.

Question 12. From the following Statement of Profit and Loss of Moontrack Ltd., for the years ended 31st March, 2011 and 2012, prepare a 'Comparative Statement of Profit and Loss':
 

Answer: First, we calculate the missing values:

For 2011-12:
Total Income = Revenue from Operations + Other Incomes = 40,00,000 + 24,00,000 = 64,00,000
Net Profit before Tax = Total Income - Expenses = 64,00,000 - 16,00,000 = 48,00,000

For 2010-11:
Total Income = Revenue from Operations + Other Incomes = 24,00,000 + 18,00,000 = 42,00,000
Net Profit before Tax = Total Income - Expenses = 42,00,000 - 14,00,000 = 28,00,000

Now, we calculate the absolute and percentage changes:

For Revenue from Operations:
Absolute Change = 40,00,000 - 24,00,000 = 16,00,000
Percentage Change = (16,00,000 / 24,00,000) × 100 = 66.67%

For Other Incomes:
Absolute Change = 24,00,000 - 18,00,000 = 6,00,000
Percentage Change = (6,00,000 / 18,00,000) × 100 = 33.33%

For Total Income:
Absolute Change = 64,00,000 - 42,00,000 = 22,00,000
Percentage Change = (22,00,000 / 42,00,000) × 100 = 52.38%

For Expenses:
Absolute Change = 16,00,000 - 14,00,000 = 2,00,000
Percentage Change = (2,00,000 / 14,00,000) × 100 = 14.29%

For Net Profit before Tax:
Absolute Change = 48,00,000 - 28,00,000 = 20,00,000
Percentage Change = (20,00,000 / 28,00,000) × 100 = 71.43%

In simple words: The company's revenue from operations grew by about 67%, and its other income grew by 33%, so total income went up by 52%. However, expenses only went up by 14%, so profit shot up by 71%.

Exam Tip: Remember to calculate Total Income and Net Profit before Tax first, then apply the percentage change formula. Show all intermediate steps — examiners reward detailed working.

Question 13. Given below is the information extracted from the books of Shyam Ltd.:
 

Prepare a Comparative Income Statement for the years 2016 and 2017 on the basis of the above information.
Answer: First, we calculate the missing values:

For 2017:
Total Expenses = Materials Consumed + Other Expenses = 11,70,000 + 91,500 = 12,61,500
Profit before Tax = Revenue from Operations - Total Expenses = 20,00,000 - 12,61,500 = 7,38,500
Income Tax (40%) = 7,38,500 × 40/100 = 2,95,400
Profit after Tax = 7,38,500 - 2,95,400 = 4,43,100

For 2016:
Total Expenses = Materials Consumed + Other Expenses = 9,75,000 + 67,700 = 10,42,700
Profit before Tax = Revenue from Operations - Total Expenses = 17,50,000 - 10,42,700 = 7,07,300
Income Tax (40%) = 7,07,300 × 40/100 = 2,82,920
Profit after Tax = 7,07,300 - 2,82,920 = 4,24,380

Now, we calculate absolute and percentage changes:

For Revenue from Operations:
Absolute Change = 20,00,000 - 17,50,000 = 2,50,000
Percentage Change = (2,50,000 / 17,50,000) × 100 = 14.29%

For Materials Consumed:
Absolute Change = 11,70,000 - 9,75,000 = 1,95,000
Percentage Change = (1,95,000 / 9,75,000) × 100 = 20.00%

For Other Expenses:
Absolute Change = 91,500 - 67,700 = 23,800
Percentage Change = (23,800 / 67,700) × 100 = 35.16%

For Total Expenses:
Absolute Change = 12,61,500 - 10,42,700 = 2,18,800
Percentage Change = (2,18,800 / 10,42,700) × 100 = 20.98%

For Profit before Tax:
Absolute Change = 7,38,500 - 7,07,300 = 31,200
Percentage Change = (31,200 / 7,07,300) × 100 = 4.41%

For Profit after Tax:
Absolute Change = 4,43,100 - 4,24,380 = 18,720
Percentage Change = (18,720 / 4,24,380) × 100 = 4.41%

In simple words: Revenue went up by 14.29%, but materials consumed went up by 20%, meaning the company had to spend more to make the goods. Other expenses went up even more by 35%. As a result, profit only went up by 4.41%, even though sales grew more.

Exam Tip: Always calculate total expenses, profit before tax, and income tax correctly. Use the formula: Profit after Tax = Profit before Tax - Income Tax. Show all calculations step by step for full credit.

Question 14. Prepare Comparative Statement of Profit and Loss from the following information.
 

Answer: First, we calculate the missing values:

For 2015:
Cost of Revenue from Operations = Purchase of Stock-in-Trade - Change in Inventories of Stock-in-Trade = 7,20,000 - 80,000 = 6,40,000
Other Expenses = 25% of 6,40,000 = 1,60,000
Total Expenses = 6,40,000 + 1,60,000 = 8,00,000
Profit before Tax = 16,00,000 - 8,00,000 = 8,00,000
Tax (35%) = 8,00,000 × 35/100 = 2,80,000
Profit after Tax = 8,00,000 - 2,80,000 = 5,20,000

For 2014:
Cost of Revenue from Operations = Purchase of Stock-in-Trade - Change in Inventories of Stock-in-Trade = 4,80,000 - 1,20,000 = 3,60,000
Other Expenses = 15% of 3,60,000 = 54,000
Total Expenses = 3,60,000 + 54,000 = 4,14,000
Profit before Tax = 12,00,000 - 4,14,000 = 7,86,000
Tax (45%) = 7,86,000 × 45/100 = 3,53,700
Profit after Tax = 7,86,000 - 3,53,700 = 4,32,300

Now, we calculate absolute and percentage changes:

For Revenue from Operations:
Absolute Change = 16,00,000 - 12,00,000 = 4,00,000
Percentage Change = (4,00,000 / 12,00,000) × 100 = 33.33%

For Cost of Revenue from Operations:
Absolute Change = 6,40,000 - 3,60,000 = 2,80,000
Percentage Change = (2,80,000 / 3,60,000) × 100 = 77.78%

For Other Expenses:
Absolute Change = 1,60,000 - 54,000 = 1,06,000
Percentage Change = (1,06,000 / 54,000) × 100 = 196.30%

For Total Expenses:
Absolute Change = 8,00,000 - 4,14,000 = 3,86,000
Percentage Change = (3,86,000 / 4,14,000) × 100 = 93.24%

For Profit before Tax:
Absolute Change = 8,00,000 - 7,86,000 = 14,000
Percentage Change = (14,000 / 7,86,000) × 100 = 1.78%

For Tax:
Absolute Change = 2,80,000 - 3,53,700 = (73,700) [This is a decrease]
Percentage Change = (-73,700 / 3,53,700) × 100 = -20.83%

For Profit after Tax:
Absolute Change = 5,20,000 - 4,32,300 = 87,700
Percentage Change = (87,700 / 4,32,300) × 100 = 20.30%

In simple words: Revenue grew by 33%, but the cost of producing goods went up by 78%, and other expenses jumped by 196%. Even though expenses grew much faster than revenue, profit still increased by 20% after tax because the tax rate went down from 45% to 35%.

Exam Tip: Remember that Cost of Revenue from Operations is calculated as Purchase of Stock minus Change in Inventories. Always show this calculation clearly. When tax rates differ across years, note that this affects the final profit — mention this insight in your analysis.

Question 15. From the following Balance Sheet of KP Ltd. as at 31st March, 2017 and 2018 prepare a Common Size Balance Sheet:
Answer:

In simple words: A common-size balance sheet shows each item as a percentage of the total. For 2018, divide each amount by 25,00,000 and multiply by 100. For 2017, divide each amount by 20,00,000 and multiply by 100. This helps you compare the two years easily, even though the totals are different.

Exam Tip: Always make sure percentages add up to 100 for both years - if they don't, you've made a calculation error.

Question 16. Following information was extracted from the Statement of Profit and Loss for the years ended 31st March, 2012 and 2013. Prepare Comparative Statement of Profit and Loss:
Answer:

In simple words: Calculate the difference between 2013 and 2012 for each item. Then divide that difference by the 2012 amount and multiply by 100 to get the percentage change. This shows you how much each item grew or fell from one year to the next.

Exam Tip: Watch for negative changes (shown with a minus sign) - they indicate decreases. The absolute change must be calculated before converting to percentage.

Question 17. Prepare a Comparative Statement of Profit and Loss from the following information:
Answer:

In simple words: Since revenue went up by 50%, all the items linked to it - like material cost and other expenses - also rise by 50%. When revenue rises proportionally, profit rises by the same percentage too.

Exam Tip: When an item is stated as a percentage of revenue (like "Cost of materials consumed: 200% of cost of material consumed"), first calculate the absolute amount, then build your comparative statement.

Question 18. Prepare 'Comparative Statement of Profit and Loss' from the following information:
Answer:

In simple words: All items rise by 60% because the revenue grows by 60%, and costs are set as fixed percentages of that revenue. So when revenue climbs, all linked items climb together at the same rate.

Exam Tip: Verify that your total expenses add up correctly before computing profit - an error in expense totals will cascade to profit calculations.

Long Answer Questions

Question 19. From the following Balance Sheets of Universe Ltd., as at 31st March, 2016 and 2017, prepare a Comparative Balance Sheet:
Answer:

In simple words: Find the difference between 2017 and 2016 for each item. Then divide that difference by the 2016 amount and multiply by 100 to get the percentage change. This reveals which parts of the business grew and which parts fell from one year to the next.

Exam Tip: Always verify that total assets equal total liabilities for each year before starting your calculations - this confirms the balance sheet is balanced.

Question 20. From the following Balance Sheets of Sun Ltd. as at 31st March, 2011 and 2012, prepare a Common Size Balance Sheet:
Answer:

In simple words: In a common-size balance sheet, you divide each item by the total and multiply by 100 to get a percentage. For 2012, divide by 50,00,000; for 2011, divide by 60,00,000. This lets you compare the two years by looking at percentages instead of rupee amounts.

Exam Tip: Check that all percentages in each column add up to 100% - if they don't, you have made a calculation mistake somewhere.

Self-Assessment Test

Time Allowed: 1 hour Marks Allotted: 30 marks

Question 1. Under which method of financial analysis, base is taken as 100% and all the other related components are expressed as a percentage of base?
(a) Ratio Analysis
(b) Comparative Statement
(c) Common-size Statement
(d) All of the above
Answer: (c) Common-size Statement
In simple words: In common-size analysis, you pick one item as your base (set it to 100%) and express all other items as a percentage of that base. This method works best when you want to see the relative size of each component.

Exam Tip: Remember that "base is taken as 100%" is the key phrase that identifies common-size statements - this wording will tip you off to the right answer in multiple-choice questions.

Question 2. Explain briefly the importance of financial analysis for 'Financial Manager'.
Answer: Financial analysis helps a financial manager in several key ways. First, it offers clear insights into the company's financial health by examining trends in revenues, costs, and profits over time. Second, it helps spot problem areas - for example, if expenses are rising too fast compared to income, the financial manager can act early. Third, it supports better decision-making about where to invest money, how to manage cash, and whether to borrow funds. Fourth, it makes it easy to compare performance across different periods, allowing the financial manager to track progress toward goals. Fifth, it reveals opportunities for development and growth by showing which areas of the business perform well and which need improvement. Sixth, stakeholders like investors, creditors, and lenders use financial analysis to judge the company's strength, so clear analysis builds confidence and trust. Overall, financial analysis is the foundation of sound financial management and strategic planning.
In simple words: Financial analysis helps managers understand how the company is doing, find problems early, make smarter choices about money, and prove to investors that the business is solid.

Exam Tip: Structure your answer with clear points - mention trend analysis, problem detection, decision support, and stakeholder confidence. Examiners reward organized, well-reasoned answers over rambling ones.

Question 3. From the information extracted from the Statement of Profit and Loss for the years ended 31st March, 2017 and 31st March, 2018, prepare a Comparative Statement of Profit and Loss:
Answer:

In simple words: Revenue jumped 80% from 2017 to 2018. Material costs rose only 20%, but other expenses shot up 260%. Yet profit before tax still climbed 110% because the gain in revenue far outpaced the rise in total costs.

Exam Tip: When you see revenue rising by a large percentage but other expenses rising faster, watch the profit margin carefully - it may be being squeezed. Always calculate profit before tax and profit after tax to show the full picture.

Question 4. Prepare a Comparative Statement of Profit and Loss for the years ended 31st March 2015 and 31st March 2014 from the following information:
Answer:

In simple words: Revenue doubled from 2014 to 2015. While profits before tax grew a bit, the profit after tax actually fell slightly. This happens because the tax amount went up faster than the profit, eating into what the company keeps.

Exam Tip: Watch for situations where profit before tax rises but profit after tax falls or rises less - this signals a higher tax burden. Always show both figures to tell the whole story.

Question 5. Explain the importance of financial analysis for (i) Labour unions, and (ii) Creditors.
Answer: (i) Labour Unions: Financial analysis is vital for labour unions for wage bargaining and job security. By studying the company's profit, cash flow, and growth trends, unions get solid evidence to demand fair wage increases and better benefits. If financial analysis shows the company is doing well, unions can ask for their share of that success. It also helps unions check whether the company truly cannot afford wage hikes or is just trying to avoid paying more. Additionally, unions use financial analysis to spot signs of financial trouble early - if profits are falling or debts are rising, they know jobs might be at risk and can act to protect workers. Strong financial health gives unions confidence to negotiate confidently, while weakness signals caution.

(ii) Creditors: Creditors rely heavily on financial analysis to decide whether to lend money and on what terms. They study the company's ability to repay loans by looking at cash flow, profit trends, and asset quality. Financial analysis reveals the company's debt levels and whether it is becoming over-leveraged. By comparing revenue growth to expense growth, creditors judge how stable the business is. If financial analysis shows the company can generate steady profits and has good assets to back the loan, creditors feel safe lending. On the flip side, if the analysis shows falling profits or rising debt, creditors either refuse to lend or demand higher interest rates to cover their risk. Thus, financial analysis directly influences the cost and ease of borrowing for the company.
In simple words: Labour unions use financial analysis to push for fair wages by proving the company earns good profits. Creditors use it to decide whether to lend money and at what interest rate.

Exam Tip: When explaining the importance of financial analysis for different stakeholders, always link it to their specific interests - workers care about jobs and wages, creditors care about repayment ability.

Question 6. Following is the Comparative Statement of Profit and Loss of Alankar Ltd. Complete the missing values left unposted by the accountant of the firm:
Answer:

In simple words: To find missing values, use these formulas: Absolute Change = Column B value minus Column A value. Percentage Change = (Absolute Change / Column A value) × 100. Apply these across all rows to fill in the blanks.

Exam Tip: Always double-check your calculations by working backwards - if percentage change is correct, multiply it by the earlier year's figure and you should get the absolute change.

Question 7. Prepare a Comparative Balance Sheet from the following information reported in the Balance Sheets of Unique Solution Ltd. for the years 31st March, 2016 and 2017:
Answer:

In simple words: To find missing figures, subtract the earlier year value from the later year value to get the absolute change. Then divide the absolute change by the earlier year value and multiply by 100 to get the percentage change.

Exam Tip: For partial balance sheets, always verify that the totals balance before calculating percentage changes - unbalanced figures signal an error in the source data.

Question 8. Prepare a Common Size Balance Sheet of X Ltd. and Y Ltd. The Balance Sheets of X Ltd. and Y Ltd. as at 31st March, 2016 are given below:
Answer: A Common Size Balance Sheet shows each item as a percentage of the total liabilities and assets. Using the balance sheet data provided for X Ltd. and Y Ltd., the common size percentages are:

The common size balance sheet reveals that X Ltd. has a higher share of current assets (60%) as compared to Y Ltd. (41.67%), while Y Ltd. has a higher proportion of non-current assets (58.33%) versus X Ltd. (40%). This indicates that X Ltd. has more liquid resources, whereas Y Ltd. is more invested in fixed long-term assets.
In simple words: A common size balance sheet turns each item into a percentage of the total so you can easily compare two companies. X Ltd. keeps more money in current assets, while Y Ltd. puts more money into fixed assets.

Exam Tip: Always divide each item by the total and multiply by 100 to get the percentage. Ensure all percentages for a company add up to 100% as a check for accuracy.