Class 12 Accountancy - Company Accounts and Analysis of Financial Statements - Chapter Analysis of Financial Statement NCERT Solutions | What is the importance of comparative st
What is the importance of comparative statements? Illustrate youranswer with particular reference to comparative income statement.
The following are the importance of Comparative Statements.
(i) Make Presentation Simpler : Comparative statements presents the financial
data in a simpler form. On the other hand, an year-wise data of the same items
are presented side-byside, which not only makes the presentation clear but also
enables easy comparisons (both intra-firm and inter-firm) conclusive.
(ii) Help in Drawing Conclusion: The presentation of comparative statement is so
effective that it helps the analyst to draw conclusion quickly and easily and that
too without any ambiguity.
(iii) Help in Forecasting :The management may analyse the trend and forecast
and draft various future plans and policy measures, with the help of comparative
statement:
(iv) Help in Detection of Problems :The comparative analysis not only enables the management in locating the problems but also helps them to put various
budgetary controls and corrective measures to check whether the current
performance is aligned with that of the ” planned targets. With the help of the
comparison of the financial data of two or more years, the financial management
can easily detect the problems.
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