Question

The comparative income statement
shows decrease or increase of...over
the previous year​

Answer 1

Answer:

comparative income statement combines information from several income statements as columns in a single statement. It helps you identify financial trends and measure performance over time. You can compare different accounting periods from your records. Or, you can compare your income statement to other companies.

Usually, you organize a comparative income statement into two or three columns. Each column represents an accounting period. Amounts are listed in rows that correspond to a specific account. Put the most current year closest to the accounts on the left.

For example, you might have columns for 2017, 2016, and 2015 (reading from left to right). Or, you could compare months, such as July, June, and May. The column furthest to the left lists the names of your accounts.

A comparative income statement helps you with many accounting tasks. Here are just a few ways the statement benefits your business:

Compare current amounts to past years

See if performance has improved over time

Figure out patterns in high and low sales months

Calculate percentages of changes

Show how your company compares to others when securing outside capital

Information on a comparative income statement helps you make smart business decisions. For example, you notice sales dip every May. The pattern tells you to step up your marketing efforts next May.

Looking at several references to compare financial figures takes time. Trying to locate information on different statements can be confusing and frustrating. A comparative income statement makes it easy to point out trends in performance. You don’t have to flip back and forth between individual documents.