Analysis of Financial Statements Class 12 | Vertical Balance Sheet | New Syllabus

Analysis of Financial Statements Class 12

Meaning

The Financial Statements are prepared periodically i.e. at the end of the financial year, all the information recorded in the books of business accounts is summarized in the financial statement.

“The statements prepared by the business to find out profitability, efficiency, solvency, and growth of the business to judge the financial strength and status are called financial statements.”

These statements give a complete picture of financial positions and managerial performance. Financial Statements are prepared for presenting the Annual Report and prepared by the profit concern as well as Non-Profit concern organizations.

You can understand the vertical balance sheet’s complete format from the video below.

There are two important Financial Statements.

(1) Balance Sheet / A Position Statement
(2) Profit and Loss A/c / An Income Statement

Financial Statement analysis includes two aspects
(a) Analysis of Data: It provides a methodical classification of financial statement
(b) Interpretation of Data: It means an explanation of the meaning and significance of data.

Analysis of Financial Statements

1. The balance sheet needs to be arranged in a vertical format which is suitable for further analysis.
   ………….. Company Ltd.
   Balance Sheet as on ……………………