Comparative and Common Size Statements — Part 2: Common Size Statements: visual lesson, ISC Class 12 Accounts

Lesson

Common Size Statements

Part 2 — every item as a share of a common base: the common-size Statement of Profit and Loss, the common-size Balance Sheet, rounding to 100.00, and comparison of firms of different sizes.

In this lesson you will

State the base of a common-size Statement of Profit and Loss and of a common-size Balance Sheet
Prepare both common-size statements for two years, rounding so that each part totals 100.00
Read a common-size statement to explain changes in cost structure, profitability and financing
Use common-size statements to compare firms of different sizes and distinguish them from comparative statements

Part 2 at a glance

Concept

Meaning and the base

Revenue from operations = 100 for profit and loss; the balance sheet total = 100 for each part of the balance sheet.

Table of the base for each common-size statement: revenue from operations for the statement of profit and loss, where other income is also divided by revenue so total income may exceed one hundred; the balance sheet total for the balance sheet, where each part adds to one hundred
Statement	Base taken as 100	Every other line
Common-size Statement of Profit and Loss	Revenue from operations of that year	Item ÷ revenue from operations × 100 (other income too, so total income may exceed 100)
Common-size Balance Sheet	Total of the balance sheet on that date	Item ÷ total × 100; each part (equity and liabilities, assets) adds to 100

Concept

Format of a common-size statement

Each year is divided by its own base.

The base of each year is that year’s own revenue or total; never divide a later-year figure by an earlier-year base.
Column	What goes in it
Particulars	Heads and sub-heads in Schedule III order
2024-25 (₹) and 2025-26 (₹)	The rupee amounts (usually shown)
2024-25 (%) and 2025-26 (%)	Each amount ÷ the base of its own year × 100, two decimals

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