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MEANING OF COMMON SIZE STATEMENTS
Common Size Financial Statements are the statements in which amounts of individual items of Balance Sheet and
Statement of Profit and Loss for two or more years are written. These amounts are further converted into percentages to
some common base.
• Percentage of each individual item shows its relation to its respective total.
• This analysis is also known as 'Vertical Analysis'.
• Common Size statements express all items of a financial statement as a percentage of some common base such as
Revenue from Operations for Statement of Profit and Loss and total assets and total liabilities for Balance Sheet.
COMMON SIZE BALANCE SHEETS
Common Size Balance Sheet is a statement in which each asset is expressed as percentage to Total Assets and each
liability is expressed as percentage to Total Equity and Liabilities. Total Assets or Total Equity and Liabilities are taken as
100 and all the figures are expressed as percentage of the total.
Objectives of Common Size Balance Sheet
• To analyse changes in individual items of balance sheet.
• To establish the trend of different items of assets, equity and liabilities.
• To assess the financial soundness and financial strategy.
Format of Common Size Balance Sheet
COMMON SIZE BALANCE SHEET as at....
Particulars Not
e
No.
Absolute Amounts Percentage of Balance
Sheet Total
Previous
Year (Rs.)
Current
Year (Rs.)
Previous
Year (%)
Current
Year(%)
I. EQUITY AND LIABILITIES
1. Shareholders' Funds
(a) Share Capital ... ... ... ...
(b) Reserves and Surplus ... ... ... ...
2. Non-Current Liabilities
(a) Long-term Borrowings ... ... ... ...
(b) Long-term Provisions ... ... ... ...
3. Current – Liabilities
(a) Short-term Borrowings ... ... ... ...
(b) Trade Payables ... ... ... ...
(c) Other Current Liabilities ... ... ... ...
(d) Short-term Provisions ... ... ... ...
Total 100 100
II. ASSETS
1. Non-Current Assets
(a) Fixed Assets
(i) Tangible Assets ... ... ...... ...
(ii) Intangible 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 Loan and Advances ... ... ... ...
(f) Other Current Assets ... ... ... ...
Page 2
MEANING OF COMMON SIZE STATEMENTS
Common Size Financial Statements are the statements in which amounts of individual items of Balance Sheet and
Statement of Profit and Loss for two or more years are written. These amounts are further converted into percentages to
some common base.
• Percentage of each individual item shows its relation to its respective total.
• This analysis is also known as 'Vertical Analysis'.
• Common Size statements express all items of a financial statement as a percentage of some common base such as
Revenue from Operations for Statement of Profit and Loss and total assets and total liabilities for Balance Sheet.
COMMON SIZE BALANCE SHEETS
Common Size Balance Sheet is a statement in which each asset is expressed as percentage to Total Assets and each
liability is expressed as percentage to Total Equity and Liabilities. Total Assets or Total Equity and Liabilities are taken as
100 and all the figures are expressed as percentage of the total.
Objectives of Common Size Balance Sheet
• To analyse changes in individual items of balance sheet.
• To establish the trend of different items of assets, equity and liabilities.
• To assess the financial soundness and financial strategy.
Format of Common Size Balance Sheet
COMMON SIZE BALANCE SHEET as at....
Particulars Not
e
No.
Absolute Amounts Percentage of Balance
Sheet Total
Previous
Year (Rs.)
Current
Year (Rs.)
Previous
Year (%)
Current
Year(%)
I. EQUITY AND LIABILITIES
1. Shareholders' Funds
(a) Share Capital ... ... ... ...
(b) Reserves and Surplus ... ... ... ...
2. Non-Current Liabilities
(a) Long-term Borrowings ... ... ... ...
(b) Long-term Provisions ... ... ... ...
3. Current – Liabilities
(a) Short-term Borrowings ... ... ... ...
(b) Trade Payables ... ... ... ...
(c) Other Current Liabilities ... ... ... ...
(d) Short-term Provisions ... ... ... ...
Total 100 100
II. ASSETS
1. Non-Current Assets
(a) Fixed Assets
(i) Tangible Assets ... ... ...... ...
(ii) Intangible 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 Loan and Advances ... ... ... ...
(f) Other Current Assets ... ... ... ...
Total 100 100
P.Y (%)= . X 100
Total of assets or liabilties of p.y.
C.Y (%)= . X 100
Total of assets or liabilties of C.y.
COMMON SIZE STATEMENT OF PROFIT AND LOSS
In Common Size Statement of Profit and Loss, Revenue from Operations (Net Sales) is taken as 100 and all other variables
of income statement are expressed as percentage of Revenue from Operations.
• It helps to determine the relationship between Revenue from Operations and other expenses.
• It may be prepared either for different periods or for two firms.
Objectives of Common Size Statement of Profit and Loss
(i) To establish relationship among various components of Statement of Profit and Loss with revenue from operations.
(ii) To study the trend in different items of Incomes and Expenses.
(iii) To assess the efficiency.
Format of Common Size Statement of Profit and Loss
COMMON SIZE STATEMENT OF PROFIT AND LOSS
for the years ended.... and....
Particulars Note No. Absolute Change Percentage of
Revenue from
Operation
Previous
Year(Rs.)
Current Year
(Rs.)
Previous Year(%) Current Year(%)
I. Revenue from Operations 100 100
II. Other Income .... .... .... ....
III. Total Revenue (I + II) .... .... .... ....
IV. Expenses
(a) Cost of Materials 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 Costs .... .... .... ....
(f) Depreciation and Amortisation Expenses .... .... .... ....
(g) Other Expenses .... .... .... ....
V. Total Expenses .... ....
VI. Profit before Tax (III-V) .... .... .... .... ....
Less: Tax .... .... .... .... ....
VII. Profit after Tax .... .... .... .... ....
P.Y (%)= . X 100
Revenue from operations of p.y.
C.Y (%)= . X 100
Revenue from operations of C.y.
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FAQs on Introduction - Common Size Statements - Crash Course of Accountancy - Class 12 - Commerce
| 1. What are common size statements in commerce? |  |
Common size statements in commerce are financial statements that present the financial figures as a percentage of a base figure. This base figure is usually the total revenue or sales of the company. It allows for easy comparison across different periods or between different companies, as it helps in analyzing the relative proportion of each financial item.
| 2. How are common size statements useful in analyzing a company's financial performance? | |
Common size statements provide valuable insights into a company's financial performance by highlighting the relative importance of different financial items. It helps in identifying trends, comparing performance over time, and benchmarking against industry peers. For example, it can show if a company's expenses are increasing at a faster rate than its revenue, indicating potential inefficiencies in cost management.
| 3. Can common size statements be used to compare financial performance across different companies? | |
Yes, common size statements are particularly useful for comparing financial performance across different companies. By presenting financial figures as a percentage of a common base figure, such as total revenue, it eliminates the impact of differences in company size and allows for a more meaningful comparison. This is especially important when analyzing companies operating in the same industry.
| 4. How can common size statements help in identifying financial strengths and weaknesses of a company? | |
Common size statements can help in identifying financial strengths and weaknesses of a company by highlighting areas of concern. For example, if a company's cost of goods sold (COGS) is significantly higher than its industry peers, it may indicate inefficiencies in procurement or production processes. On the other hand, if a company's operating profit margin is higher than its competitors, it may indicate strong pricing power or cost control measures.
| 5. What are the limitations of using common size statements in financial analysis? | |
While common size statements are helpful, they do have some limitations. Firstly, they only provide a snapshot of the financial position at a specific point in time and may not capture the dynamics of a business over time. Secondly, they rely on accurate and reliable financial data, which may not always be available. Lastly, they may not capture qualitative factors or non-financial indicators that are important for a comprehensive analysis of a company's performance.
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