Chapter 17, Problem 5E

To determine

Concept Introduction:

Income statement: The income statement shows details of net revenue, expenses and profit for the period. As per IFRS the expenses have to disclosed separately for income tax, finance costs and other costs

Financial Statements: There are three basic financial statements which are Profit and loss statements shows the revenues and expenses and net profit or loss for an accounting period. Next is balance sheets which shows the assets and liabilities of the company as on date and cash flow statements showing the sources and used of fund for a accounting period

Common Size Percent: This is a method of analysis of financial statements by comparing two or more financial statements of same company or different companies. All figures are shown as percentage of base value. In case of income statement each item of income statement is shown as percentage of sales value. In case of balance sheet the amount of total asset will be taken as base amounts and items in asset side will shown as percentage of base value likewise the total of liability and owner equity will be taken as base value items will be shown as percentage of base value

The formula of calculation of common size percent is shown below
$\text{Common size Percent = }\frac{\text{Analysis amount }}{\text{Base amount}}\text{ x 100}$

Trend Percent: This is method of analysis of financial statements by comparing two or more financial statements of same company or different companies. The base year figures are shown as 100% for all items. The comparative year figures are shown as percentage of base value. For example sales of base year will be shown as 100% and comparative years will be calculated as below
$\text{Trend Percent = }\frac{\text{Analysis amount }}{\text{Base amount}}\text{ x 100}$

To Prepare:

Net income statement for three years