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Explain how common size statements are prepared giving an example.

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The two Common Size Statements that are most commonly prepared are as follows.

 • Common Size Balance Sheet 

• Common Size Income Statements 

Common Size Statement is prepared in a columnar form for analysis. In a Common Size Statement each item of the financial statements is compared to a common item. The analyses based on these statements are commonly known as Vertical Analysis. The following are the columns prepared in a Common Size Statement. 

• Particulars Column: This column shows the various financial items under their respective heads. 

• Amount-Columns: These columns depict the amount of each item, subtotals and the gross total of a particular year. 

• Percentage or Ratio Columns: These columns show the proportion of each item to the common item either in terms of percentage or ratio. 

The Balance Sheet of Sun Ltd. and Moon Ltd., are given as follows :

Prepare Common Size Balance Sheet for two companies:

Step 1: Title of the Common Size Statement, i.e. ‘Common Size Balance Sheet’ is written on the top of the statement. 

Step 2: In the ‘Particulars’ column, the various items of the Balance Sheet are shown under the headings of‘Assets’ and ‘Liabilities’. 

Step 3: In the ‘Amount’ column, amount of the items are shown in the ‘Year’ column to which they belong 

Step 4: The Assets and Liabilities are totaled and are shown separately for each year. 

Step 5: In the ‘Percentage’ column, the percentage of each item in comparison to the Total of Balance Sheet are shown. The percentage change in each item is calculated by the help of the following formula.

The following are the statement of Profit and Loss of a Company for the year ending 31.3.2009 and 31.3.2010. Prepare common size statement of Profit and Loss.

Common Size Statement of Profit and Loss for the year ending 31st March 2009 and 31st March 2010.

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