Common-size statement can be prepared with three columns. Following are the steps to be followed in preparation of common-size statement:
(i) Column 1: In this column, particulars of items of income statement or balance sheet are written.
(ii) Column 2: Enter absolute amount.
(iii) Column 3: Choose a common base as 100. For example, revenue from operations can be taken as the base for income statement and total of balance sheet can be taken as the base for balance sheet. Work out the percentage for all the items of column 2 in terms of the common base and enter them in column 3.
Format of common-size statement:

Particulars	Absolute amount	Percentage

(i) Give only interim reports:
Financial statements are prepared at the end of every accounting period. But the actual position of the business can be known only when the business is closed.
(ii) LImited access to external users:
The external users do not have detailed and frequent information of financial results as they have limited access
(iii) Influenced by personal judgement:
Preparation of financial statements may be influenced by personal judgements and therefore these are not free from bias.

The nature of financial statement is historical. Past cannot be the index of future and cannot be cent percent basisi for future estimation forecasting budgeting and planning.

Trend analysis for Kurinji Ltd

Particulars	Rs.in thousands			Trend percentages
	2015-16	2016-17	2017-18	2015-16	2016-17	2017-18
Revenue from operations	120	132	156	100	110	130
Add: Other income	50	38	65	100	76	130
Total revenue	170	170	221	100	100	130
Less: Expenses	100	135	123	100	135	123
Profit	70	35	98	100	50	140

Computation of trend percentage for revenue from operations:
For 2016-17: \(\cfrac { 132 }{ 120 } \times 100=110\)%
For 2017-18: \(\cfrac { 156 }{ 120 } \times 100=130\)%

Common-size income statement for the year ended 31^st March, 2019

Particulars	Mani Ltd		Kani Ltd
	Absolute amount	Percentage of revenue from operations	Absolute amount	Percentage of revenue from operations
	Rs.	Rs.	Rs.
Revenue from operations	2,00,000	100	2,50,000	100
Add: Other income	30,000	15	25,000	10
Total revenue	2,30,000	115	2,75,000	110
Less: Expenses	1,10,000	55	1,25,000	50
Profit before tax	1,20,000	60	1,50,000	60

Comparative income statement of Abdul Co. Ltd for the years ended 31^st March, 2016 and 31^st March, 2017

Particulars	2015-16	2016-17	Absolute amount of increase (+) or decrease (–)	Percentage increase (+) or decrease (–)
	Rs.	Rs.	Rs.
Revenue from operations	3,00,000	3,60,000	+60,000	+20
Add: Other income	1,00,000	60,000	–40,000	–40
Total revenue	4,00,000	4,20,000	+20,000	+5
Less: Expenses	2,00,000	1,80,000	–20,000	–10
Profit before tax	2,00,000	2,40,000	+40,000	+20
Less: Tax (30%)	60,000	72,000	+12,000	+20
Profit after tax	1,40,000	1,68,000	+28,000	+20

Comparative balance sheet of Kala Ltd as on 31st March 2017 and 31st March 2018

Particulars	2016-17 Rs.	2017-18 Rs.	Absolute amount of increase (+) or decrease (-) Rs.	Percentage  increase (+) or  decrease (-)
I Equity and Liabilities
1. Share holder's fund
(a) Share capital	3,00,000	3,60,000	+ 60,000	+20
(b) Reserve and surplus	50,000	50,000	-	-
2. Non-current liabilities
Long term borrowings	50,000	40,000	- 10,000	- 20
3. Current liabilities
Trade payables	20,000	12,000	- 8,000	- 40
Total	4,20,000	4,62,000	42,000	+10
II. Assets
1. Non-current assets
(a) Fixed assets	2,50,000	2,90,000	+ 40,000	+ 16
(b) Non-current investments	50,000	40,000	- 10,000	- 20
2. Current assets
Inventories	80,000	1,00,000	+ 20,000	+ 25
Cash and cash equivalents	40,000	32,000	- 8,000	- 20
	4,20,000	4,62,000	42,000	+10

Common-size balance sheet of Maria Ltd as on 31^st March, 2018

Particulars	Absolute amount	Percentage of total assets
	Rs.
I EQUITY AND LIABILITIES
Shareholders’ funds	4,00,000	50
Non-current liabilities	3,20,000	40
Current liabilities	80,000	10
Total	8,00,000	100
II ASSETS
Non-current assets	6,00,000	75
Current assets	2,00,000	25
Total	8,00,000	100

Trend refers to the tendency of movement. Trend analysis refers to the study of movement of figures over a period. The trend may be increasing trend or decreasing trend or irregular

Working capital statement or schedule of changes in working is prepared to disclose net change in working capitals on two specific dates (generally two balance sheet dates). It is prepared from current assets and current liabilities
Working Capital = current Assets - Current Liabilities.

Following are the commonly used tools of financial statement analysis
(i) Comparative statement
(ii) Common-size statement
(iii) Trend analysis
(iv) Funds flow analysis
(v) Cash flow analysis

Financial statements are the statements prepared by the business concern at the end of the accounting period to ascertain the operating results and the financial position. The basic financial statements prepared by business concerns are income statement and balance sheet.

Comparative income statement of Arul Ltd for the years ended 31^st March 2016 and 31^st March 2017

Particulars	2015-16	2016-17	Absolute amount of increase (+) or decrease (-)	Percentage increase (+) or decrease (-)
Revenue from Operations	50,000	60,000	+10,000	+20
Add: Other income	10,000	30,000	+20,000	+200
Total revenue	60,000	90,000	+30,000	+50
Less: Expenses	40,000	50,000	+10,000	+25
Profit before tax	20,000	40,000	+20,000	100

Note:
Computation of percentage increase for revenue form operations =  \(\frac{10,000}{50,000}\times100\) = 20%
Percentage increase for other incomes = \(\frac{20,000}{10,000}\times100\) = 200%
Percentage increase for expenses = \(\frac{10,000}{40,000}\times100\) = 25%

(b) Both (A) and (R) are true and (R) is not the correct explanation of (A)

(b) Both (A) and (R) are true and (R) is not the correct explanation of (A)