Common Size Statement in Accounting
Introduction
A common size statement is a tool of financial statement analysis. Common statements include the balance sheet, and income statements are shown in analytical percentages. In common size statements, the various figure is shown as a percentage of total assets, total sales, and total liabilities.
Total assets are taken as 100%, and different assets are expressed as a percentage of the total assets. Similarly, total liabilities are taken as 100%, and different liabilities are expressed as a percentage of the total liabilities.
There are two types of common size statements:
- Common-size Balances Sheet
- Common Size Income Statement
There is an example to understand the common size balance sheet of the company.
Common-size balance sheet
|
Particulars | Rama’s Co.
Amount $’000 | Sham Co.
Amount $’000 |
| Preference share capital. ‘
Equity shares capital Reserve and surplus Long – Term Loans Bills payable Sundry creditors Outstanding expense Proposed dividend
Land and Building Plant and machinery Temporary Investment Inventories Books- debts Prepaid expenses Cash and bank balance | 12000
150 14 115 2 12 15 10 | 16000
400 18 130 – 4 6 90 |
| 438 | 808 | |
|
80 334 1 10 4 1 8 |
123 600 40 25 8 2 10 | |
| 438 | 808 |
Common size Balance Sheet
As on Dec. 31 2015
| Particulars | Rama’s co. | Sham Co. | ||||||
| Amount
$’000 | Percentages
% | Amount
$’0000 | Percentage
% | |||||
| Fixed assets
Land and building Plant and machinery | 80
334 | 18.26
76.26 | 123
600 | 15.22
74.62 | ||||
| Total fixed assets | 414 | 94.52 | 723 | 89.48 | ||||
| Current assets
Temporary assets Inventories Books debt Prepaid expenses Cash and balance | 1
10 4 1 8 | 0.23
2.28 0.91 0.23 1.83 | 40
25 8 2 10 | 4.95
3.08 0.99 0.25 1.25 | ||||
| Total current assets | 24 | 5.48 | 85 | 10.52 | ||||
| Total Assets | 438 | 100.00 | 808 | 100 | ||||
| Share capital and reserve
Preference share capital Equity shares capital Reserve and surpluses Total capital and reserve | 120
150 14 284 | 27.39
34.25 3.19 64.83 | 160
400 18 578 | 19.80
49.50 2.23 71.53 | ||||
| Long-term loans | 115 | 26.25 | 130 | 16.09 | ||||
| Current liabilities
Bills payable Sundry creditors Outstanding expenses Proposed dividend | 2
12 15 10 | 0.46
2.74 3.44 2.28 | –
4 6 90 | –
0.49 0.74 11.15 | ||||
| Total current Liabilities | 39 | 8.92 | 100 | 12.38 | ||||
| Total liabilities | 438 | 100 | 808 | 100 | ||||
| Example:- |
Common Size Income Statement | |||||||
| Particulars | 2014
Amount $’000 | 2015
Amount$’ 000 | ||||||
| Sales
Others Incomes Expenses Cost of sale Office expense Selling expense Interest | 500
20 520 325 20 30 25 | 700
15 715 510 25 45 30 | ||||||
Solution
Common – Size Income Statement
For the year ending Dec 2014 and 2015
| Particulars | 2014 | 2015 | ||
| Amount
$(000) | % | Amount
$(000) | % | |
| Sales
Less: Cost of sale | 500
325 | 100
65 | 700
510 | 100
72.86 |
| Gross Profit | 175 | 35 | 190 | 27.14 |
| Operating expenses
Office expenses Selling expenses Total operating Expenses Operating profits Other Incomes Total income Less Non-operating Expenses Net profits | 20
30 | 4
6 | 25
45 | 3.58
6.42 |
| 50 | 10 | 70 | 10.0 | |
| 125
20 | 25
4 | 120
15 | 17.14
2.14 | |
| 145
25 | 29
5 | 135
30 | 19.28
4.28 | |
| 120 | 24 | 105 | 15 |
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