The Trend Balance Sheet
Chapter Seventeen
Syllabus topic 2, "Trend Analysis – Concept, selection of base year, computation of trend percentages and interpretation of trends in sales, profits, assets, liabilities and shareholders’ funds."
Pages 41 to 43 of 162
In one line
A trend balance sheet puts the vertical balance sheet of three or more years side by side and expresses every line as a percentage of its own figure in the base year.
The figures
Deepshikha Ltd, balance sheets as at 31 March 2025, 2026 and 2027.
| Liabilities | 2025, Rs | 2026, Rs | 2027, Rs |
|---|---|---|---|
| Equity share capital | 4,00,000 | 4,00,000 | 5,00,000 |
| 9 per cent preference share capital | 1,00,000 | 1,00,000 | 1,00,000 |
| General reserve | 60,000 | 90,000 | 1,40,000 |
| 10 per cent debentures | 2,00,000 | 2,00,000 | 1,60,000 |
| Creditors | 90,000 | 1,20,000 | 1,50,000 |
| Outstanding expenses | 20,000 | 30,000 | 30,000 |
| Provision for taxation | 30,000 | 40,000 | 50,000 |
| Total | 9,00,000 | 9,80,000 | 11,30,000 |
| Assets | 2025, Rs | 2026, Rs | 2027, Rs |
|---|---|---|---|
| Fixed assets, net | 5,40,000 | 5,80,000 | 6,60,000 |
| Investments | 60,000 | 60,000 | 80,000 |
| Stock | 1,20,000 | 1,50,000 | 1,80,000 |
| Debtors | 1,00,000 | 1,30,000 | 1,60,000 |
| Cash and bank | 60,000 | 50,000 | 40,000 |
| Preliminary expenses | 20,000 | 10,000 | 10,000 |
| Total | 9,00,000 | 9,80,000 | 11,30,000 |
Step one: put all three years into the vertical form
This is the step the question is really testing. Nothing can be indexed until the analytical totals exist.
| Particulars | 2025, Rs | 2026, Rs | 2027, Rs |
|---|---|---|---|
| Equity share capital | 4,00,000 | 4,00,000 | 5,00,000 |
| 9 per cent preference share capital | 1,00,000 | 1,00,000 | 1,00,000 |
| General reserve | 60,000 | 90,000 | 1,40,000 |
| Less: preliminary expenses | (20,000) | (10,000) | (10,000) |
| Proprietors' funds | 5,40,000 | 5,80,000 | 7,30,000 |
| 10 per cent debentures | 2,00,000 | 2,00,000 | 1,60,000 |
| Loan funds | 2,00,000 | 2,00,000 | 1,60,000 |
| CAPITAL EMPLOYED | 7,40,000 | 7,80,000 | 8,90,000 |
| Particulars | 2025, Rs | 2026, Rs | 2027, Rs |
|---|---|---|---|
| Fixed assets, net | 5,40,000 | 5,80,000 | 6,60,000 |
| Investments | 60,000 | 60,000 | 80,000 |
| Stock | 1,20,000 | 1,50,000 | 1,80,000 |
| Debtors | 1,00,000 | 1,30,000 | 1,60,000 |
| Cash and bank | 60,000 | 50,000 | 40,000 |
| Current assets | 2,80,000 | 3,30,000 | 3,80,000 |
| Creditors | 90,000 | 1,20,000 | 1,50,000 |
| Outstanding expenses | 20,000 | 30,000 | 30,000 |
| Provision for taxation | 30,000 | 40,000 | 50,000 |
| Current liabilities | 1,40,000 | 1,90,000 | 2,30,000 |
| Particulars | 2025, Rs | 2026, Rs | 2027, Rs |
|---|---|---|---|
| Working capital, current assets less current liabilities | 1,40,000 | 1,40,000 | 1,50,000 |
| CAPITAL EMPLOYED, fixed assets plus investments plus working capital | 7,40,000 | 7,80,000 | 8,90,000 |
Both halves agree in all three years. Check that before indexing anything.
Step two: index every line on 2025
Deepshikha Ltd Trend balance sheet, vertical form, base year 2025 = 100
| Particulars | 2025 | 2026 | 2027 |
|---|---|---|---|
| Proprietors' funds | 100.00 | 107.41 | 135.19 |
| Loan funds | 100.00 | 100.00 | 80.00 |
| CAPITAL EMPLOYED | 100.00 | 105.41 | 120.27 |
| Particulars | 2025 | 2026 | 2027 |
|---|---|---|---|
| Fixed assets | 100.00 | 107.41 | 122.22 |
| Investments | 100.00 | 100.00 | 133.33 |
| Current assets | 100.00 | 117.86 | 135.71 |
| Current liabilities | 100.00 | 135.71 | 164.29 |
| Working capital | 100.00 | 100.00 | 107.14 |
| CAPITAL EMPLOYED | 100.00 | 105.41 | 120.27 |
Specimen working.
| Proprietors' funds, 2027 | 7,30,000 over 5,40,000 times 100 = 135.19 |
| Current liabilities, 2026 | 1,90,000 over 1,40,000 times 100 = 135.71 |
| Loan funds, 2027 | 1,60,000 over 2,00,000 times 100 = 80.00 |
Step three: the interpretation
Write it under three heads: financing, application, liquidity.
Financing. The company has degeared. Proprietors' funds stand at 135.19 and loan funds at 80.00, so while the owners' stake grew by a third the borrowing was reduced by a fifth. Both halves of that movement were deliberate: Rs 1,00,000 of fresh equity was issued and Rs 40,000 of debentures repaid, and the general reserve more than doubled out of retained profit. Deepshikha is a safer company for a lender in 2027 than it was in 2025.
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