Question

Explain the steps involved in preparing comparative statements?

Answer 1

Following are the steps to be followed in preparation of the comparative statement:

1. Column 1: In this column, particulars of items of the income statement or balance sheet are written.
2. Column 2: Enter the absolute amount of year 1.
3. Column 3: Enter the absolute amount of year 2.
4. Column 4: Show the difference in amounts between year 1 and year 2. If there is an increase in year 2, put plus sign and if there is a decrease put a minus sign.
5. Column 5: Show percentage increase or decrease of the difference amount shown in column 4 by dividing the amount shown in column 4 (absolute amount of increase or decrease) by column 2 (year 1 amount).
   That is,
   Percentage increase or decrease = `"Absolute amount of increase or decrease"/"Year 1 amount" xx 100`