Comparative financial statements are ones, which have been prepared in a systematic manner and provides statistical information about a particular event (financial transaction) or aspect, taking place on different dates or during different periods.
The comparative financial statements are chalked out in a columnar form (in majority of the cases). One is also able to view comparative accounts of different companies.
Comparative financial statements, like all other financial statements have the following types of financial statements:
Cash flow statements
Also known as profit and loss financial statement, these types of comparative financial statements suggest profit amount earned by a company as well as amount of money lost by a company. Loss or profit may not always mean, loss or profit of money, it may also include any asset or stock, which has an economic value. Income statements also include expenditure incurred for conducting activities, related to operations. This type of a financial statements is referred to as an operating financial statement.
An income statement can be of two types:
- Single step income statements
- Multi step income statements
It is suggested that, in the preparation of a financial statement, the income statement, is first worked on. This is generally followed by the statements of cash flow and balance sheet. In the preparation of a balance sheet, information from the cash flow statement as well as income statement is often required.
Information pertaining to expenses and profit earned by a company are recorded in the balance sheet.
Statement of Cash Flow:
Records information about movement of cash within and outside the company.
Use of Comparative Financial Statements:
The comparative financial statements are very helpful in carrying out company analysis. This type of financial statement is also helpful in observing trends. The auditor traces the various trends pertaining to a particular financial activity of a company. The auditor may suggest measures to improve the financial health of the company.
Last Updated on : 26th June 2013