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capital and liabilities amount asset amount

Common Size Balance Sheet: Aditya and Anjali
A common size balance sheet presents financial statement items as a percentage of total assets or total liabilities and equity. This allows for easier comparison across different periods or entities. Here’s how to create a common size balance sheet for Aditya and Anjali.
Steps to Prepare a Common Size Balance Sheet
1. Identify Total Assets or Total Liabilities and Equity
- Determine the total assets or total liabilities and equity from the balance sheet.
2. Calculate Common Size Percentages
- For each item on the balance sheet, divide the item amount by the total assets or total liabilities and equity, then multiply by 100 to get a percentage.
Example of Common Size Balance Sheet
Assuming the balance sheets for Aditya and Anjali are as follows:
- Total Assets:
- Aditya: $100,000
- Anjali: $150,000
- Assets Breakdown:
- Cash: $20,000 (Aditya), $30,000 (Anjali)
- Inventory: $30,000 (Aditya), $50,000 (Anjali)
- Fixed Assets: $50,000 (Aditya), $70,000 (Anjali)
- Liabilities and Equity:
- Total Liabilities: $40,000 (Aditya), $60,000 (Anjali)
- Equity: $60,000 (Aditya), $90,000 (Anjali)
Common Size Presentation
- For Aditya:
- Cash: (20,000 / 100,000) * 100 = 20%
- Inventory: (30,000 / 100,000) * 100 = 30%
- Fixed Assets: (50,000 / 100,000) * 100 = 50%
- For Anjali:
- Cash: (30,000 / 150,000) * 100 = 20%
- Inventory: (50,000 / 150,000) * 100 = 33.33%
- Fixed Assets: (70,000 / 150,000) * 100 = 46.67%
Benefits of Common Size Analysis
- Comparative Analysis: Facilitates comparison between different companies or time periods.
- Financial Trends: Helps identify trends in asset allocation and financial structure.
- Decision Making: Aids investors and management in making informed decisions based on financial health.
Using this common size balance sheet approach, both Aditya and Anjali can effectively analyze their financial positions relative to each other and the industry standards.