Tag: preparation of common size statements

Questions Related to preparation of common size statements

Trendz Spa is a company listed on the Bombay Stock Exchange. Its Financial statements for the year ended 31 March 2015 Showed earning per share of Rs.136. 
On 1 October 2015, Trendz spa made a 3 for 1 bonus issue. According to IAS 33 - 'Earning per share', what figure for the 2015 EPS will be shown as comparative information in the financial statements for the year ended 31 March 2016?

accountancy tools of financial statement analysis - comparative and common-size statements preparation of common size statements comparative statements and common-size statements preparation of comparative statements

  1. Rs.34

  2. Rs.45.36

  3. Rs.408

  4. Rs.544

Show answer
Correct Option: A
Explanation:
Earning per share = Earning for equity shareholders 
                                 ----------------------------------------------
                                             No. of shares. 
                                =    Rs-136
                                    -------------
                                       3 + 1 
                                = Rs-34 per share. 

Observing changes in the financial variables across the years___________.

accountancy tools of financial statement analysis - comparative and common-size statements preparation of common size statements comparative statements and common-size statements preparation of comparative statements

  1. Vertical analysis

  2. Horizontal analysis

  3. Inter firm comparison

  4. None of these

Show answer
Correct Option: B
Explanation:

Observing changes in the financial variables across the years is done through horizontal analysis. Horizontal analysis is a trend analysis where the firm compares ratios, statements etc over a period of time. 

Common-size Income Statement is that statement in which amount of Revenue from Operations is taken as 100 and all other amounts are expressed as percentage thereof.

book keeping and accountancy analysis of financial statements preparation of common size statements comparative statements and common-size statements tools of financial statement analysis - comparative and common-size statements

  1. True

  2. False

Show answer
Correct Option: A
Explanation:

True. Common-size Income statement is the vertical analysis of Income Statement. A vertical analysis is shows all items as percentages and not in absolute figures which provides better comparison. Each line item is expressed as a percentage figure of the base figure within the statement. The base is always shown as 100. 

A financial statement that shows both rupees and percentages in the report is referred to as ______________.

book keeping and accountancy analysis of financial statements preparation of common size statements comparative statements and common-size statements tools of financial statement analysis - comparative and common-size statements

  1. A Balance sheet

  2. A Common size statement

  3. A Proportional financial statement

  4. A Relative statement of equity

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Correct Option: B

Which of the following is/are objective of common-size income statement?

book keeping and accountancy analysis of financial statements preparation of common size statements comparative statements and common-size statements tools of financial statement analysis - comparative and common-size statements

  1. To analyse change in individual items of statement of Profit and Loss.

  2. To study the trend in different items of Revenues and Expenses.

  3. To assess the efficiency.

  4. All of the above

Show answer
Correct Option: D

Common-size Balance Sheet shows _______________.

book keeping and accountancy analysis of financial statements preparation of common size statements comparative statements and common-size statements tools of financial statement analysis - comparative and common-size statements

  1. Assets, Equity and Liabilities in absolute values.

  2. Assets and Liabilities as percentage of total assets or total equity and liabilities.

  3. Both (a) and (b)

  4. None of the above

Show answer
Correct Option: C

Common-size Income Statement is the vertical analysis of Income Statement.

book keeping and accountancy analysis of financial statements preparation of common size statements comparative statements and common-size statements tools of financial statement analysis - comparative and common-size statements

  1. True

  2. False

Show answer
Correct Option: A
Explanation:

True. Common-size Income statement is the vertical analysis of Income Statement. A vertical analysis is shows all items as percentages and not in absolute figures which provides better comparison. Each line item is expressed as a percentage figure of the base figure within the statement. 

Objectives of common-size income statement is/are ________________.

book keeping and accountancy analysis of financial statements preparation of common size statements comparative statements and common-size statements tools of financial statement analysis - comparative and common-size statements

  1. To analyse change in individual items of statement of profit and loss.

  2. To study the trend in different items of revenues and expenses.

  3. To assess the efficiency.

  4. All of the above

Show answer
Correct Option: D
Explanation:

Objectives of common-size income statement are to analyse change in individual items of statement of profit and loss, to study the trend in different items of revenues and expenses and to assess the efficiency of the enterprise. 

'To determine the trend of different items of statement', is one of the objectives of common-size statements.

book keeping and accountancy analysis of financial statements preparation of common size statements comparative statements and common-size statements tools of financial statement analysis - comparative and common-size statements

  1. True

  2. False

Show answer
Correct Option: A
Explanation:

True. To determine the trend of different items of statement is one of the objectives of common size statements. It measure the relationship of different items of financial statements with a common variable. 

Which of the following statements are true?
a. Common size balance sheet shows relative value of the various items.
b. In the common size income statement, each product is represented as a percentage of the net sales figure.
c. Common size income statements represents the various element as a percentage of the gross profit.

book keeping and accountancy analysis of financial statements preparation of common size statements comparative statements and common-size statements tools of financial statement analysis - comparative and common-size statements

  1. Both (a) and (b)

  2. Both (a) and (c)

  3. Both (b) and (c)

  4. All of the above

Show answer
Correct Option: A
Explanation:

Common size statement, also known as component percentage statement, is a financial tool for studying the key changes and trends in the financial position and operational result of a company. Common size balance sheet shows relative value of the various items. In common size income statement, the item of expenditure are shown as percentage of the net sales.