Meaning of Trend Analysis: Comparison of past data over a period of time with a base year is Trend Analysis. It computes the changes in percentage for different variables over a long period and then makes a comparative study of them. Each item in the base year is taken as 100 and on that basis, trend analysis for the corresponding items in the other years are calculated. Compute the trend percentage from the following data taking 2010 as the base year. Compute the trend percentage from the following data taking 2010 as the base year.

1. MANAGEMENTACCOUNTING
FinancialAnalysis and Interpretation :
TrendAnalysis
By:
Smt.UMA MINAJIGI REUR
HEAD, DEPT. OF COMMERCE & Management
Smt. V G Degree College for Women, Kalaburagi

2. MANAGEMENT
ACCOUNTING
B.COM SIXTH SEMESTER
&
BBA FOURTH SEMESTER
6.3: PRINCIPLES OF MANAGEMENT ACCOUNTING

3. B.COM SIXTH SEMESTER
6.3: PRINCIPLES OF MANAGEMENT ACCOUNTING
Unit I: Management Accounting (08 Hours):
Definition and objectives of Management Accounting - Relationship between Cost, Financial and Managerial Accounting.
Unit II : Financial Statements (15 Hours):
Nature, uses and limitations. Analysis and interpretations – meaning, procedure, objectives, and importance. Comparative
statement, Common Size Statements and Trend Analysis - practical problems.
Unit III: Ratio Analysis (15 Hours):
Definition and meaning of Ratio Analysis, importance and limitations, Profitability Ratio – Gross profit Ratio, operating
Ratio, Overall profitability ratio – Earning per share. Turnover Ratios- Inventory Turnover Ratio, Debtors Turnover Ratio,
Debt collection period , Creditors Turnover Ratio, Debt payment period, Liquidity Ratio- current ratio, liquid ratio.
Financial positions and Leverage Ratios- Debt Equity Ratio, Proprietary Ratio - Problems thereon.
Unit IV: Analysis through Leverages (12 Hours):
Meaning- types of Leverages- operating – financial and combined leverages- problems thereon.
Unit V: Fund Flow Statement (15 Hours):
Meaning , uses and limitations – preparation of fund-flow statement. Cash Flow Statement: Meaning and preparation of
Cash flow statement- problems thereon.

4. Unit II : Financial Statements :
• Nature, uses and limitations.
• Analysis and interpretations – meaning,
procedure, objectives, and importance.
• Comparative statement,
• Common Size Statements and
• Trend Analysis - practical problems.

5. Definition:
J.S. Batty defines, “Management accounting is the term used
to describe the accounting methods, systems and techniques
which coupled with special knowledge and ability to assist
management in its task of maximising profit and minimising
losses.”
Management Accounting is a system for gathering data and
other financial information primarily for the internal needs of
management. It is designed to assist internal management in
the efficient formulation, execution and appraisal of business
plans.

6. Trend Analysis
Or Trend Percentage or Trend Ratio Analysis
Meaning of Trend Analysis:
Comparison of past data over a period of time with a base year is
Trend Analysis.
It computes the changes in percentage for different variables over a
long period and then makes a comparative study of them.
Each item in the base year is taken as 100 and on that basis, trend
analysis for the corresponding items in the other years are calculated.

7. Trend Analysis
Or Trend Percentage or Trend Ratio Analysis
The trend percentage helps the analyst to study the changes that have
occurred during the period. Such analysis indicates the progress of
business by showing ups and downs in its activities.
The comparison may be made in three different ways:
1. Percentage of changes
2. Ratio of changes
3. Graphic or diagrammatic presentation of the changes.

8. Trend Analysis
Or Trend Percentage or Trend Ratio Analysis
Procedure for calculating trends analysis
Or Steps for calculating trend analysis
1. Selecting of base year i.e, one year is taken as a base year, generally the first
or the last is taken as base year.
2. The figures of base year are taken as 100.
3. Trend percentage is calculated is calculated in relation to base year.

9. Trend Analysis
Computation of trend percentage
The following points are to be taken into account while calculating the
trend percentage.
1. Some accounting principles and practices should be followed.
2. The base year should be clearly selected i.e, either first year or last year.
Generally, earliest year is taken is taken as the base year.
3. Every item in the base statements is started at 100.
4. Trend percentage should be calculated only for items having logical
relationship with one another.

10. Trend Analysis
Computation of trend percentage
The following points are to be taken into account while calculating the
trend percentage.
5. Trend percentage of cash item in another statement is calculated with
reference to the same item in the base statement by using the following
formula:
Percentage =
𝑽𝒂𝒍𝒖𝒆 𝒐𝒇 𝒂 𝒑𝒂𝒓𝒕𝒊𝒄𝒖𝒍𝒂𝒓 𝒊𝒕𝒆𝒎 𝒊𝒏 𝒐𝒕𝒉𝒆𝒓 𝒔𝒕𝒂𝒕𝒆𝒎𝒆𝒏𝒕
𝑽𝒂𝒍𝒖𝒆 𝒐𝒇 𝒕𝒉𝒆 𝒔𝒂𝒎𝒆 𝒊𝒕𝒆𝒎 𝒊𝒏 𝒃𝒂𝒔𝒆 𝒔𝒕𝒂𝒕𝒆𝒎𝒆𝒏𝒕

11. Illustration: 1
Compute the trend percentage from the following data taking 2010 as the
base year.
Year Sales (Rs.) Stock (Rs.)
2010 40,000 4,000
2011 52,000 5,000
2012 64,000 6,000
2013 62,000 5,600
2014 64,000 5,400
2015 60,000 5,800
2016 48,000 5,200

12. Illustration: 1
Solution:
For Sales:
Trend Percentage =
𝑪𝒐𝒏𝒄𝒆𝒓𝒏𝒆𝒅 𝑰𝒕𝒆𝒎
𝑩𝒂𝒔𝒆 𝒚𝒆𝒂𝒓 𝒊𝒕𝒆𝒎
∗ 100
Calculation of trend percentages:
2011 =
𝟓𝟐𝟎𝟎𝟎
𝟒𝟎𝟎𝟎𝟎
∗ 100 = 130
2013 =
𝟔𝟐𝟎𝟎𝟎
𝟒𝟎𝟎𝟎𝟎
∗ 100 = 155
2015 =
𝟔𝟎𝟎𝟎𝟎
𝟒𝟎𝟎𝟎𝟎
∗ 100 = 150
2012 =
𝟔𝟒𝟎𝟎𝟎
𝟒𝟎𝟎𝟎𝟎
∗ 100 = 160
2014 =
𝟔𝟒𝟎𝟎𝟎
𝟒𝟎𝟎𝟎𝟎
∗ 100 = 160
2016 =
𝟒𝟖𝟎𝟎𝟎
𝟒𝟎𝟎𝟎𝟎
∗ 100 = 120
Year Sales
(Rs.)
Stock
(Rs.)
2010 40,000 4,000
2011 52,000 5,000
2012 64,000 6,000
2013 62,000 5,600
2014 64,000 5,400
2015 60,000 5,800
2016 48,000 5,200
Particul
ar
31st December Trend Percentage 100 Base Year 2010
2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016
Sales 40000 52000 64000 62000 64000 60000 48000 100 130 160 155 160 150 120
Stock 4000 5000 6000 5600 5400 5800 5200 100 125 150 140 135 145 130

13. For Stock:
Trend Percentage =
𝑪𝒐𝒏𝒄𝒆𝒓𝒏𝒆𝒅 𝑰𝒕𝒆𝒎
𝑩𝒂𝒔𝒆 𝒚𝒆𝒂𝒓 𝒊𝒕𝒆𝒎
∗ 100
Calculation of trend percentages:
2011 =
𝟓𝟎𝟎𝟎
𝟒𝟎𝟎𝟎
∗ 100 = 125
2013 =
𝟓𝟔𝟎𝟎
𝟒𝟎𝟎𝟎
∗ 100 = 140
2015 =
𝟓𝟖𝟎𝟎
𝟒𝟎𝟎𝟎
∗ 100 = 145
2012 =
𝟔𝟎𝟎𝟎
𝟒𝟎𝟎𝟎
∗ 100 = 150
2014 =
𝟓𝟒𝟎𝟎
𝟒𝟎𝟎𝟎
∗ 100 = 135
2016 =
𝟓𝟐𝟎𝟎
𝟒𝟎𝟎𝟎
∗ 100 = 130
Year Sales
(Rs.)
Stock
(Rs.)
2010 40,000 4,000
2011 52,000 5,000
2012 64,000 6,000
2013 62,000 5,600
2014 64,000 5,400
2015 60,000 5,800
2016 48,000 5,200
Particul
ar
31st December Trend Percentage 100 Base Year 2010
2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016
Sales 40000 52000 64000 62000 64000 60000 48000 100 130 160 155 160 150 120
Stock 4000 5000 6000 5600 5400 5800 5200 100 125 150 140 135 145 130

14. Trend Percentage
Parti
cular
31st December Trend Percentage 100 BaseYear 2010
2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016
Sales 40000 52000 64000 62000 64000 60000 48000 100 130 160 155 160 150 120
Stock 4000 5000 6000 5600 5400 5800 5200 100 125 150 140 135 145 130

15. Illustration: 2
From the following data calculate the trend percentages.
Particulars 2015 2016 2017
Sales 3,00,000 4,00,000 5,00,000
Cost of Sales 1,50,000 2,50,000 3,00,000
Other Expenses 75,000 1,05,000 1,40,000
Financial Expenses 15,000 20,000 10,000

16. Particulars 2015 2016 2017 Trend percentage 100 Base year
2015
2015 2016 2017
I. Continuing operations
1. Revenue from
operations (Sales)
3,00,000 4,00,000 5,00,000 100 133.33 166.67
Total Revenue (A) 3,00,000 4,00,000 5,00,000 100 133.33 166.67
2. Expenses
Cost of sales 1,50,000 2,50,000 3,00,000 100 166.67 200.00
Finance Cost 15,000 20,000 10,000 100 133.33 66.67
Other Expenses 75,000 1,05,000 1,40,000 100 140.00 186.67
Total Expenses (B) 2,40,000 3,75,000 4,50,000 100 156.25 187.50
Profit After Tax(A-B) 60,000 25,000 50,000 100 41.67 83.33
Solution:
Trend Analysis Income Statement for the year ending 2015 to 2017.
Particulars 2015 2016 2017
Sales 3,00,000 4,00,000 5,00,000
Cost of Sales 1,50,000 2,50,000 3,00,000
Other Expenses 75,000 1,05,000 1,40,000
Financial Expenses 15,000 20,000 10,000

17. For Sales:
Trend Percentage =
𝑪𝒐𝒏𝒄𝒆𝒓𝒏𝒆𝒅 𝑰𝒕𝒆𝒎
𝑩𝒂𝒔𝒆 𝒚𝒆𝒂𝒓 𝒊𝒕𝒆𝒎
∗ 100
Calculation of trend percentages:
2016 =
𝟒𝟎𝟎𝟎𝟎𝟎
𝟑𝟎𝟎𝟎𝟎𝟎
∗ 100 = 133.33
2016 =
𝟐𝟓𝟎𝟎𝟎𝟎
𝟏𝟓𝟎𝟎𝟎𝟎
∗ 100 = 166.66
2016 =
𝟐𝟎𝟎𝟎𝟎𝟎
𝟏𝟎𝟓𝟎𝟎𝟎
∗ 100 = 133.33
2017 =
𝟓𝟎𝟎𝟎𝟎𝟎
𝟑𝟎𝟎𝟎𝟎𝟎
∗ 𝟏𝟎𝟎 = 𝟏𝟔𝟔. 𝟔𝟔
2017 =
𝟑𝟎𝟎𝟎𝟎𝟎
𝟏𝟓𝟎𝟎𝟎𝟎
∗ 𝟏𝟎𝟎 = 𝟐𝟎𝟎
2017 =
𝟏𝟎𝟎𝟎𝟎
𝟏𝟓𝟎𝟎𝟎
∗ 𝟏𝟎𝟎 = 𝟔𝟔. 𝟔𝟔
For cost of Sales:
For Finance Cost:
2016 =
𝟏𝟎𝟓𝟎𝟎𝟎
𝟕𝟓𝟎𝟎𝟎
∗ 100 = 140 2017 =
𝟏𝟒𝟎𝟎𝟎
𝟕𝟓𝟎𝟎𝟎
∗ 𝟏𝟎𝟎 = 𝟏𝟖𝟔, 𝟔𝟔
For Other Expenses:

18. Thank You
Watch next PPT & Video for
Problems on Trend Analysis
Balance Sheet