The Comparative Balance Sheet
Chapter Nineteen
Syllabus topic 3, "Comparative Financial Statements – Preparation and analysis of Comparative Income Statement and Comparative Balance Sheet, calculation of absolute and percentage changes, and interpretation of financial performance and position."
Pages 48 to 50 of 162
In one line
A comparative balance sheet sets two years' positions side by side with the rupee and percentage change against each item, and its central finding is how the growth was financed and where it went.
The statement
Sunrise Industries Ltd Comparative balance sheet as at 31 March 2026 and 31 March 2027
| Particulars | 2026, Rs | 2027, Rs | Change, Rs | Change, per cent |
|---|---|---|---|---|
| SOURCES OF FUNDS | ||||
| Equity share capital | 10,00,000 | 10,00,000 | nil | nil |
| 9 per cent preference share capital | 2,00,000 | 2,00,000 | nil | nil |
| Reserves and surplus | 1,40,000 | 3,00,000 | 1,60,000 | 114.29 |
| Proprietors' funds | 13,40,000 | 15,00,000 | 1,60,000 | 11.94 |
| 10 per cent debentures | 4,00,000 | 4,00,000 | nil | nil |
| CAPITAL EMPLOYED | 17,40,000 | 19,00,000 | 1,60,000 | 9.20 |
| Particulars | 2026, Rs | 2027, Rs | Change, Rs | Change, per cent |
|---|---|---|---|---|
| APPLICATION OF FUNDS | ||||
| Fixed assets, net | 13,00,000 | 14,00,000 | 1,00,000 | 7.69 |
| Non-current investments | 1,00,000 | 1,00,000 | nil | nil |
| Stock | 2,60,000 | 3,00,000 | 40,000 | 15.38 |
| Debtors | 1,60,000 | 2,40,000 | 80,000 | 50.00 |
| Cash and bank | 1,50,000 | 1,80,000 | 30,000 | 20.00 |
| Prepaid expenses | 20,000 | 40,000 | 20,000 | 100.00 |
| Current assets | 5,90,000 | 7,60,000 | 1,70,000 | 28.81 |
| Creditors | 1,40,000 | 2,20,000 | 80,000 | 57.14 |
| Outstanding expenses | 32,000 | 38,000 | 6,000 | 18.75 |
| Provision for taxation | 78,000 | 1,02,000 | 24,000 | 30.77 |
| Current liabilities | 2,50,000 | 3,60,000 | 1,10,000 | 44.00 |
| Particulars | 2026, Rs | 2027, Rs | Change, Rs | Change, per cent |
|---|---|---|---|---|
| Working capital, current assets less current liabilities | 3,40,000 | 4,00,000 | 60,000 | 17.65 |
| CAPITAL EMPLOYED, fixed assets plus investments plus working capital | 17,40,000 | 19,00,000 | 1,60,000 | 9.20 |
The two halves change by the same Rs 1,60,000, which is the check. A comparative balance sheet whose two halves show different changes has an arithmetical error in it.
The interpretation
Write it under four heads: financing, fixed assets, working capital, liquidity.
Financing. Capital employed rose Rs 1,60,000, or 9.20 per cent, and every rupee of it came from reserves. Share capital is unchanged, preference capital is unchanged, and debentures are unchanged. The company financed its whole expansion out of retained profits. That is the single most important thing the statement says, and it makes the business less dependent on outsiders than it was.
Fixed assets. They rose Rs 1,00,000, or 7.69 per cent, slower than the capital employed. So the expansion was not chiefly in plant, and the remaining Rs 60,000 of new funds went into working capital.
Working capital. It rose Rs 60,000, or 17.65 per cent, but the two sides of it moved very differently. Current assets rose 28.81 per cent while current liabilities rose 44.00 per cent, so the business is being financed more by its own creditors than it was.
And inside the current assets, one item is out of line. Debtors rose 50.00 per cent against sales that rose 25 per cent, so the amount owed by customers has grown twice as fast as the sales that produced it. That is the finding of the statement, and it means either that credit terms were relaxed or that collection has slowed. Stock rose only 15.38 per cent, well under sales, which is favourable and suggests stock is being turned faster.
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