1.
Common Size Statement
PRESENTED BY
VIKASH BARNWAL
ASSISTANT PROFESSOR
FACULTY OF BUSINESS MANAGEMENT
KASHI INSTITUTE OF TECHNOLOGY, VARANASI

2.
Introduction
A Vertical Analysis of Financial Statements of a company, in which the amount of
individual items of a Balance Sheet of Statement of Profit & Loss are written, is known
as a Common Size Financial Statement.
The amounts written are then converted into percentage by taking a common base;
which is, Revenue from Operations or Net Sales in case of Statement of Profit & Loss
and Total Assets or Total Equity and Liabilities in case of a Balance Sheet. The
percentages calculated by taking the respective common bases are then compared
with the corresponding percentages of other periods, through which meaningful
conclusions can be drawn. A Common-size Statement can be prepared for inter-firm
and intra-firm comparisons or a Balance Sheet and Income Statement.

3.
Common-size Statements are accounting statements expressed in percentage of
some base rather than rupees.– Kohler
A statement that shows the percentage relation of each asset/liability to the total
assets/total of equity and liabilities, is known as a Common-size Balance Sheet.

4.
Objectives of Common Size Balance Sheet
Different objectives of a Common-size Balance Sheet are as follows:
 1. The basic objective of a Common-size Balance Sheet is to analyse the changes
in the individual items of a Balance Sheet.
 2. It is also prepared to see the trends of different items of assets, equity and
liabilities of a Balance Sheet.
 3. Lastly, it is prepared for the assessment of the financial soundness of the
organisation and to understand its financial strategy.

5.
Preparation of Common Size Balance Sheet
A Common-size Balance Sheet has the following six columns:
 1. First Column: In the first column, the items of the Balance Sheet are written.
 2. Second Column: In the second column, Note No. given against the line item is written.
 3. Third Column: In the third column, the amounts of different items; i.e., assets, equity, and
liabilities of the previous year are written.
 4. Fourth Column: In the fourth column, the amounts of different items; i.e., assets, equity, and
liabilities of the current year are written.
 5. Fifth Column: In the fifth column, the percentage relation of the different items of the previous
year’s Balance Sheet to the Total of Equity and Liabilities/Total Assets are written. Here, the Total of
Equity and Liabilities/Total Assets are taken as 100.
 6. Sixth Column: In the last column, the percentage relation of the different items of the current
year’s Balance Sheet to the Total of Equity and Liabilities/Total Assets are written. Here, the Total of
Equity and Liabilities/Total Assets are taken as 100.

6.
From the following Balance Sheet of Shreya Ltd. as at 31st March 2020, prepare a Common-
size Balance Sheet: