Read TS Grewal Solution Class 12 Chapter 3 Tools of Financial Statement Analysis 2025. Students should study TS Grewal Solutions Class 12 Accountancy available on Studiestoday.com with solved questions and answers. These chapter-wise answers for Class 12 Accountancy have been prepared by expert teachers. These TS Grewal Class 12 Solutions have been designed as per the latest accountancy TS Grewal Book for Class 12 and if practiced thoroughly can help you to score good marks in Accounts class tests and examinations.
Class 12 Accounts Chapter 3 Tools of Financial Statement Analysis TS Grewal Solutions
TS Grewal Solutions for Chapter 3 Tools of Financial Statement Analysis Class 12 Accounts have been provided below based on the latest TS Grewal Class 12 book. The answers have been prepared based on the latest 2025 book for the current academic year. TS Grewal Solutions Class 12 will help students to improve their concepts and easily solve accountancy questions for Class 12.
Chapter 3 Tools of Financial Statement Analysis TS Grewal Class 12 Solutions
About this chapter: TS Grewal Class 12 Chapter 3 Tools of Financial Statement Analysis helps students to understand various types of tools which are used by accountants to analyse financial statements and take decisions. It is very important to understand the financial health of an organisation to assess the overall performance of the company. There are various topics such as financial ratios, profitability ratios, etc which are being utilized by companies to understand financial statements. In this chapter, the overall importance of doing financial analysis and understanding the financial situation of a company has been explained. This is a very important chapter as lot of questions in the class 12 accountancy examinations are being asked from this chapter. The students should solve the practical questions which have been given at the end of this chapter and also compare them with the answers which have been provided below by our teachers. The concepts explained in this chapter will be used by students who are planning to pursue a career in accountancy.
Solutions for T.S. Grewal's Analysis of Financial Statements
Textbook for CBSE Class 12 TS Grewal Solutions Class 12 Accountancy
TS Grewal Solutions Class 12 Accountancy
Chapter 3 Tools of Financial Statement Analysis Comparative Statements and Common Size Statements
Question 1. From the following information, prepare Comparative Balance Sheet of Dreams Converge Ltd.:
Answer:
Question 2. From the following Balance Sheet, prepare Comparative Balance Sheet of Sun Ltd.:
Answer:
About Solution:
Window Dressing: It refers to the presentation of a better financial position than what it actually is by way of manipulating the books of accounts. Such false representation will provide misleading information for analysis which will result in wrong decision making.
Things to Remember:
Analysis is a systematic process of dividing the financial information into simple and valuable elements, establishing relationships between inter-related elements and interpreting the same to understand the working and financial position of an enterprise from its financial statements.
Important Notes:
As per Myer: Financial Statement Analysis is largely a study of relationships among the various financial factors in a business, as disclosed by a single set of statements, and a study of trends of these factors, as shown in a series of statements.
Question 3. Following is the Balance Sheet, of Radha Ltd. as at 31st March, 2024:
About Solution:
Symptoms: Financial statements analysis facilitates identifying symptoms or problems but it fails to provide solution or remedy for the same. Rectification of the error or problem has to be taken care of by the management based on their respective analysis.
Things to Remember:
To Assess the Earning Capacity or Profitability: Earning Capacity and Profitability of the enterprise can be accessed from the financial statement analysis. It also facilitates forecasting of the same for the future years. External users are interested in earnings and hence, this is their prime objective of analysing financial statement. ii. To Assess the Managerial Efficiency: This assessment is possible because financial statement analysis identifies the areas where managers have been efficient and where not. Favorable and un-favorable variations can be identified to pinpoint the managerial inefficiency.
Important Notes:
To Assess the Short-term and Long-term Solvency of the Enterprise: This assessment is possible by analyzing the financial statements minutely. Creditors or suppliers are interested to know the ability of the entity to meet the short-term liabilities and Debenture holders and lenders are interested to know the long term and short term solvency of the enterprise to assess the ability of the company to repay the principal and interest thereon.
Question 4. Balance Sheet of Blue Bell Ltd. as at 31st March, 2024 is given below:
You are required to prepare Comparative Balance Sheet on the basis of the information given in the above Balance Sheet
Answer:
About Solution:
Comparative Statements or Comparative Financial Statements - It means a comparative study of components or elements or items of Balance Sheet and Statement of Profit or Loss for two or more years.
Things to Remember:
Facilitate Inter-firm Comparison: Inter-firm Comparison helps an enterprise to assess its own performance as well as that of others if mergers and acquisitions are to be considered.
Important Notes:
To Forecast and Prepare Budgets: Analysis of historical data in the financial statements helps in assessing developments in future. It facilitates forecasting and preparing budgets for the future years
Question 5. Following is the summarised Balance Sheet of Wye Ltd. As at 31st March,2024:
You are required to comment upon the changes in absolute figures from one period to another.
Answer:
About Solution:
Data Presentation becomes Simple and Comparable: It isa statement with data for two or more years in a tabular form. Such tabular representation makes the data simple, understandable and comparable for drawing appropriate conclusions from the complex information.
Things to Remember:
Security Analysis: It is a process used by the investor to identify whether the firm is fulfilling his expectations with regard to dividends, capital appreciation, etc. Such analysis is done by a security analyst who is interested in cash generating ability, dividend pay-out policy and the behavior of share prices.
Important Notes:
Credit Analysis: It is useful when a firm or bank offers credit to a new customer or a dealer. Management is always interested to know credit worthiness of client so as to take decisions regarding whether to allow or extend credit to them or not
Indicates Trend: It gives information about the changes affecting financial position and performance of an enterprise. It helps in forecasting by the way of indicating the trend.
Things to Remember:
Debt Analysis: It is useful when a firm wants to know its borrowing capacity.
Important Notes:
Dividend Decision: It is useful in determining the rate of dividend in order to decide how much of the earnings are to be distributed in the form of dividends and how much is to be retained. Dividend decisions have a direct impact on profitability of the firm and behavior of its share prices so are to be taken wisely using Financial Statement Analysis.
Question 7. From the Following Balance Sheet of Royal Industries Ltd. as at 31st March, 2024, prepare Comparative Balance Sheet:
Answer:
About Solution:
Comparison with other Firms and Industry Performance: It helps in comparison of an enterprise's performance with that of other enterprises or with that of the industry.
Things to Remember:
Management: Financial analysis helps the management to ascertain overall as well as segment- wise efficiency of the business. It also helps in decision making, controlling and self-evaluation.
Important Notes:
Employees and Trade Unions: Financial Analysis is considered helpful for employees to get a clear idea of the emoluments, bonus, working conditions and security of their jobs by analysing profitability, sustainability and financial position of the enterprise from its financial statements. In order to take proper decisions and enter into beneficial wage agreements, trade unions also analyse financial statements to determine the degree of profitability of the enterprise based on which they can further negotiate
Question 8. Prepare Comparative Statement of Profit & Loss from the following information:
Answer:
Question 9. Following information is extracted from the Statement of Profit and Loss of Gold Coin Ltd. for the year ended 31st March, 2015
Answer:
About Solution:
Forecasting and Planning: Analyzing changes and trend in the financial data of previous years helps the management in forecasting and planning.
Things to Remember:
Shareholder or Owners or Investors: These are the investors who invest or contribute their savings in the form of capital. Therefore, they are interested in the returns of the business which can be ascertained from the profitability of the business. Also, growth potential helps in investment appreciation.
Important Notes:
Potential Investors: These are those who are interested to know the present profitability and the financial position as well as future prospects to make their mind of investment into business concern.
Question 10. Following information is extracted from the Statement of Profit and Loss of Gold Coin Ltd. for the year ended 31st March, 2015
Answer:
Question 11. Prepare a Comparative Statement of Profit & Loss from the following:
Answer:
Question 12. Prepare a Comparative Income Statement of Bikul Ltd. with the help of the following information:
Answer:
Question 13. Prepare Comparative Statement of Profit and Loss from the following information:
Answer:
About Solution:
Investment Decision: Such statements are important to the potential investors to decide whether to invest in the company's share. From such statements they can obtain the useful information to take appropriate investment decisions.
Things to Remember:
Intra-firm Analysis: It facilitates a comparison of the various financial variables of an enterprise over a period of time and therefore, it is also known as Time Series Analysis or Trend Analysis. It helps analyzing performance of an enterprise over a period of time.
Important Notes:
Rearrangement of Financial Statements: It is necessary to reclassify the complex data contained in the financial statement into purposive classes so that maximum desired information from every data for analysis can be obtained.
Question 14. Prepare a Comparative Statement of Profit & Loss from the information extracted from the Statement of Profit & Loss for the year ended 31st March, 2017 and 2018.
Answer:
About Solution:
Decisions and Plans: Such statements are important to the management of the company to take proper decisions and to formulate plans and policies accordingly.
Things to Remember:
Researchers: Parties engaged into research activity and wish to perform the same over the business entities so as to analyze the profitability, growth and financial position of an enterprise. To gather information on such areas, they are interested in analyzing respective aspects of such areas which includes data related to business operations, finance, human resource, etc.
Important Notes:
Tax Authorities: Tax Authorities are interested in ensuring proper assessment of tax liabilities of the enterprise as per the tax laws in force from time to time.
Question 15. From the following information, prepare comparative statement of profit and loss showing increase, decrease and percentage:
Answer:
About Solution:
1. Calculation of Revenue from Operation for 2024 = 13,44,000 × 125/100 = 16,80,000
2. Calculation of Revenue from Operation for 2023 = 6,00,000 × 200/100 = 12,00,000
3. Calculation of Other Expenses for 2024 = 16,80,000 × 10/100 = 1,68,000
4. Calculation of Other Expenses for 2023 = 12,00,000 × 10/100 = 1,20,000
5. Calculation of Tax for 2024 = 1,68,000 × 50% = 84,000
6. Calculation of Tax for 2023 = 4,80,000 × 50% = 2,40,000
Things to Remember:
Internal Analysis: This is a detailed and accurate type of analysis done by the management of the enterprise to determine the financial position and operational efficiency of the organisation. Since, management has access of complete information; they perform an extensive type of analysis which is more detailed and accurate.
Important Notes:
Horizontal Analysis: It is also known as Dynamic Analysis. It is done to review and analyse financial statement for a number of years and hence, is also known as time series analysis. It facilitates comparison of financial data for several years against a chosen base year.
Question 16. From the following particulars obtained from the books of Mark, prepare a Comparative Statement of Profit & Loss:
Answer:
Question 17. From the following information, prepare Comparative Statement of Profit & Loss:
Answer:
Question 18. Prepare Comparative Statement of Profit and Loss from the following Statement of Profit and Loss:
Answer:
About Solution:
Decisions and Plans: Such statements are important to the management of the company to take proper decisions and to formulate plans and policies accordingly.
Things to Remember:
Researchers: Parties engaged into research activity and wish to perform the same over the business entities so as to analyze the profitability, growth and financial position of an enterprise. To gather information on such areas, they are interested in analyzing respective aspects of such areas which includes data related to business operations, finance, human resource, etc.
Important Notes:
Tax Authorities: Tax Authorities are interested in ensuring proper assessment of tax liabilities of the enterprise as per the tax laws in force from time to time
Question 19. From the following Statement of Profit and Loss, prepare comparative statement of profit and loss:
Answer:
About Solution:
Lenders: These are the funds providers in the form of loan. In order to evaluate as to whether the loan is safe, whether any further loan is to be made and at what rate, such statements are important information providers to the lenders.
Things to Remember:
Vertical Analysis: It is also known as Static Analysis. It is done to review and analyze the financial statements of one year only. It is useful in comparing the performance of several companies of the same type or divisions or departments in one enterprise.
Important Notes:
Inter-firm Analysis: It facilitates a comparison of two or more firms based on the various financial factors or variables that will help decide the competitiveness of the respective firms. A comparison of a single set of statements of two or more firms is termed as Cross-sectional Analysis.
Question 20. From the following Statement of Profit and Loss of Star Ltd., for the year ended 31st March, 2015 and 2016, prepare a Common size statement:
Answer:
About Solution:
Qualitative Elements are ignored: Financial Statements are based completely on monetary items and therefore, many non-monetary important factors which affect the profitability of the business are ignored.
Things to Remember:
Common Size Financial Statements:
1. It is a vertical analysis of Financial Statements in which amounts of individual items of Balance Sheet or Statement of Profit or Loss are written. These amounts are further converted into percentages to a common base.
2. These percentages can be compared with the corresponding percentages in other periods and meaningful conclusions can be drawn.
3. Such statements may be prepared for intra-firm and inter-firm comparison.
4. Such statements may be prepared for Balance Sheet as well as Income Statement.
Important Notes:
Ratio Analysis:
1. It is a study of relationship among various financial factors in a business.
2. It is a technique of analyzing the financial statements with the help of accounting ratio.
3. It is a process of determining and interpreting relationships between items of financial statements to provide a meaningful understanding of the financial performance and position of an enterprise.
Question 21. Prepare a Common-Size Statement of Profit & Loss of ‘Hari Darshan Ltd.’ from the following information:
Answer:
About Solution:
Affected by Estimates and Personal Judgment: Financial Statements are the outcome of accounting concepts and conventions combined with estimated and are therefore, not free from bias.
Things to Remember:
Interpretation: This is the concluding part of the financial statement analysis. The interpretation should be precise and directed towards indicating the movement if various financial characteristics.
Important Notes:
Comparative Statements:
1. It means a comparative study of individual components or elements or items of Balance Sheet and Statement of Profit or Loss for two or more years.
2. At first, the value of each component or element or item of two or more financial years is placed alongside each other.
3. After this, differences between the two amounts is determined.
4. Lastly percentage change in the amount from the base year is ascertained.
5. Such comparative statements can be Intra-Firm or Inter-Firm Comparisons.
Question 22. Prepare a Common-Size Statement of Profit & Loss of ‘Hari Darshan Ltd.’ from the following information:
Additional Information: Other expenses include Provision for Tax of Rs. 2,00,000 for the year ending 31st March, 2023 and Rs. 2,50,000 for the year ending 31st March, 2024.
Answer:
About Solution:
Historical Records: Financial Statements provide information which is historical in nature and therefore, it is not useful for the potential investors or lenders as it does not provide any information of the future business or its future financial position.
Things to Remember:
Comparison: Once the classification of the complex data is done, it is necessary to obtain comparative data of the same enterprise of the past periods if it is a time series analysis. If it is a cross sectional analysis, it is necessary to obtain comparative data of the same accounting period of similar or comparable enterprises.
Important Notes:
Analysis: The comparative financial data is then analyzed with reference to financial characteristics like profitability, solvency and liquidity.
Question 23. Prepare Common-size Statement of Profit and Loss from the following statement of Profit and Loss:
Answer:
About Solution:
Cannot Meet the Purpose of all Parties: Financial Statements for a period are used by a number of interested users for various purposes and interests. It is not possible to meet the purpose of all interested parties.
Things to Remember:
As per this accounting standard, cash flows are showed under the following 3 heads:
1. Cash Flow from Operating Activities;
2. Cash Flow from Investing Activities; and
3. Cash Flow from Financing Activities.
Important Notes:
Historical Analysis: Financial Statements are prepared using the historical information of the financial transactions that have already taken place. As a result financial statements are correctly termed as a historical record of financial transactions. Analysis of such transactions is therefore, a historical analysis. Therefore, the statement is incorrect as it makes reference to use of future data.
Question 24. Prepare Common-size Statement of Profit and Loss from the following statement of Profit and Loss:
Answer:
Common-size income statement for the years ended I and II.
About Solution:
Aggregate Information: Financial Statements show aggregate information and not detailed information and hence, it is not that useful for the users in decision making.
Things to Remember:
Price Level Changes are not considered: If there is a change in the price level, analysis of financial statements of different accounting years become invalid as accounting records ignore change in value of money.
Important Notes:
Qualitative Aspect Ignored: Financial Statements record only monetary transactions which are quantitative in nature. Other important qualitative elements which affect the financial statements are not considered.
Question 25. From the following information, prepare a Common-Size Balance Sheet:
Answer:
About Solution:
1. Calculation of Other Incomes for 2024 = Rs. 20,00,000 × 20% = Rs. 4,00,000
2. Calculation of Other Incomes for 2023 = Rs. 30,00,000 × 12% = Rs. 3,60,000
3. Calculation of Expenses for 2024 = Rs. 20,00,000 × 60% = Rs. 12,00,000
4. Calculation of Expenses for 2023 = Rs. 30,00,000 × 70% = Rs. 21,00,000
Things to Remember:
Customers: Customers have an interest in information about the continuance of an enterprise. This is particularly when they are either dependent on the enterprise or they have a long term involvement with the enterprise.
Important Notes:
External Analysis: This type of analysis is done by investors, credit agencies, researchers, etc. who do not have access to the confidential and complete records of an enterprise and therefore, have to depend on information published in various statements or reports which shall comprise of Statement of Profit and Loss, Balance Sheet, Auditor's Reports etc.
Question 26. Prepare Common-size Balance Sheet and comment on the financial position of Sun Ltd. and Star Ltd. The Balance Sheet of Sun Ltd. and Star Ltd. as at 31st March, 2024 are:
Answer:
Question 27. From the following information, prepare a Common-Size Balance Sheet:
Answer:
About Solution:
Accounting Practices: In order to compare the profitability and the financial position of different firms, it is necessary that these firms follow same accounting practices. If different accounting practices are followed, inter-firm comparison is not possible.
Things to Remember:
Financial Statements Limitations: Financial Statements are not always accurate and are subject to some limitations. Since, analysis is based on the information provided by financial statements, such limitations will therefore, have an impact on the decisions taken based on the analysis of information provided by such financial statement.
Important Notes:
Not free from bias: Financial statements are the outcome of accounting concepts and conventions combined with estimates. Estimates cannot be relied upon completely as there are chances that the amounts may fluctuate and hence, are not free from bias. Therefore, the financial statements are not completely reliable.
Old Questions
Question. From the Following Balance Sheet of H.P. Ltd. as at 31st March, 2019, prepare Comparative Balance Sheet:
Answer:
Question. Prepare Comparative Statement of Profit and Loss from the following Statement of Profit and Loss:
Answer:
Question. Prepare Comparative Statement of Profit and Loss from the following Statement of Profit and Loss:
Answer:
Question. From the following Information, prepare Comparative Statement of Profit and Loss:
Answer:
Working Note:-
1. Calculation of Other Incomes for 2019 = Rs. 20,00,000 × 20% = Rs. 4,00,000
2. Calculation of Other Incomes for 2018 = Rs. 30,00,000 × 12% = Rs. 3,60,000
3. Calculation of Expenses for 2019 = Rs. 20,00,000 × 60% = Rs. 12,00,000
4. Calculation of Expenses for 2018 = Rs. 30,00,000 × 70% = Rs. 21,00,000
Question. From the following Statement of Profit and Loss of Antriksh Ltd. for the year ended 31st March, 2012 and 2013, Prepare Comparative Statement of Profit and Loss:
Rate of Income Tax was 40%.
Answer:
Question. From the following Statement of Profit and Loss, prepare Comparative Statement of Profit and Loss:
Answer:
Question. From the Following Balance Sheet of Depth Ltd. as at 31st March, 2019, prepare Comparative Balance Sheet:
Answer:
