Unique Advantages Of Comparative Income Statement
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Below are the Advantage and Disadvantages.
Advantages of comparative income statement. One advantage of using comparative statements is the ability to highlight the percentages. An analyst can compare the financial performances at a glance since percentage of increase or decrease of each individual component of cost assets liabilities etc. The single-step format has the advantage of being relatively simple to prepare and understand while the multiple-step income statement provides all important financial and managerial information that the user otherwise has to calculate from a single-step income statement.
In simple words it predicts income statements for future periods of time. Also called a pro forma income statement it is a financial report that compares the estimated revenue and expense numbers with the real numbers. The comparative income statement not only shows the operational efficiency of the business but also helps in comparing the results with the competitors over different time periods.
A Budgeted Income Statement serves the same purpose. A comparative income statement presents the results of multiple accounting periods in separate columns. The budgeted income statement is useful to report all the earnings and expenses for a particular period of time for a given period of time say a month quarter and year.
You can compare different accounting periods from your records. The intent of this format is to allow the reader to compare the results of multiple historical periods thereby giving a view of how a business is performing over time. By restating the change of each line item as a percentage comparative statements help you see large changes from one year to the next.
Spikes and dips in revenues and expenses are immediately obvious when. The following advantages may be advocated. Comparative statements are financial reports that compare a given financial statement with either a prior time period or another company.
Some of the advantages are. These include the higher level of detail and the multiple levels of income reported. Each format of the income statement has its advantages.
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