What are comparative financial statements?
Comparative financial statements include financial information on current and previous periods for review. The balance sheet and the profit and loss statement are the two most common statements prepared in this format. The information given is either in dollars or the percentage of total report information. Companies often use this format to perform a horizontal analysis of their information. This analysis is looking for deviations between the months and attempts to define where the company is doing well and where it is not.
The previous period of financial information may be either for the previous month or year. For example, the company may want to compare information about April 2011 with April 2010 data. This allows the company to determine how stable financial data are every year every year. The ability to discover seasonal trends from comparative financial statements can also be easier to use an annual comparison with information from the previous year. Comparison of Moonin -th Basic information allows one -year review. Finding extremeDollars differences can help focus the company's budget review. Managers or accountants examine each deviation to determine why the company has become better or worse in a particular area. The control process also allows society to look for errors. Finding errors before the financial statements are released to external participating parties is also necessary to ensure the accuracy of the information.
Most companies often use comparative financial statements internally rather than externally. The last published statements are in traditional format only with information about the current period. In this format, the statement falls into the Accounting Administration principle. This allows the company to prepare financial data that best suits internal needs. This leads to the preparation of the scattering of the dollar or the relative percentage analysis.
When using a computer software accounting system, the accounting can program it to prepareComparative financial statements in a specific manner. Settings in a message may include months compared in the message and whether the information states dollar or percentage differences. In some automatic messages, the company may include both dollar deviations and percentage differences in its comparative financial statements. This avoids the need to prepare two sets of financial statements. Accounting programs can call these statements financial statements of common size that prepare information in a similar way.