Question

In preparing Common-size Balance Sheet, each item of Balance Sheet is expressed as % of ______.

पर्याय

• Non-current Assets.

• Current Assets.

• Non-current Liabilities.

• Total Assets.

Answer 1

In preparing Common-size Balance Sheet, each item of Balance Sheet is expressed as % of total assets.

Explanation:

While preparing a common-size balance sheet, the total assets (which is always equal to the total equity and Liabilities) is taken as the common base and assumed to be 100%. Every individual asset item is then divided by Total Assets, and every individual equity or liability item is divided by Total Liabilities and Equity to express them as a relative percentage of that total. This vertical analysis allows for an easy comparison of financial structures between different accounting periods or different companies.