Comparative Income Statement Horizontal Analysis

It helps in easy analysis of trends and as such also known as trend analysis.
Comparative income statement horizontal analysis. A comparative income statement combines information from several income statements as columns in a single statement. Horizontal analysis uses a line by line comparison to compare the totals. Prepare a comparative income statement with horizontal analysis indicating the increase decrease for the current year when compared with the previous year. The statements for two or more periods are used in horizontal analysis.
You can compare different accounting periods from your records. It helps you identify financial trends and measure performance over time. Horizontal analysis compares the same line item in the statement for two different periods and calculates the increase or decrease from one period to the next. Or you can compare your income statement to other companies.
Types of comparative income statement analysis 1 horizontal analysis one of the popular techniques of comparative income statement which shows the change in amount both in absolute and percentage terms over a period of time. We need to horizontal analysis on this company. The comparative financial statements of synotech inc will serve as a basis for an example of horizontal analysis and vertical analysis of a balance sheet and a statement of income and retained earnings. Horizontal analysis involves the computation of amount changes and percentage changes from the previous to the current year.
Horizontal analysis also known as trend analysis is a financial statement analysis technique that shows changes in the amounts of corresponding financial statement items over a period of time. Recall that horizontal analysis calculates changes in comparative statement items or totals. For example if you run a comparative income statement for 2018 and 2019 horizontal analysis allows you to compare revenue. The percentage analysis of increases and decreases in corresponding items in comparative financial statements is called horizontal analysis.
If required round to one decimal place. It is a useful tool to evaluate the trend situations.