Comparative Income Statement

Article byWallstreetmojo Team
Reviewed byDheeraj Vaidya, CFA, FRM

What Is Comparative Income Statement?

A comparative Income Statement is the income statement in which multiple periods of the income statement are dealt with and compared side by side to allow the reader to compare the incomes from a previous year and decide whether or not to invest in the company.

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It helps various stakeholders of the business and the Analyst community to analyze the impact of business decisions over the company’s top line and bottom lineBottom LineThe bottom line refers to the net earnings or profit a company generates from its business operations in a particular accounting period that appears at the end of the income statement. A company adopts strategies to reduce costs or raise income to improve its bottom line. read more and helps identify various trends over the period, which otherwise would have been difficult and time-consuming.

Key Takeaways

  • A comparative income statement is an income statement in which numerous periods are considered and compared to enable the reader to reach the last year’s income and decide about investing in the company.
  • Horizontal and vertical analyses are the two comparative income statement analysis types.
  • Financial data recorded in the comparative income statement is valid only when similar accounting principles are used to create these statements. Therefore, such a consolidated income statement will serve a different purpose than in case of deviation.

Comparative Income Statement Explained

A Comparative Income Statement shows the operating results for several accounting periods. It helps the reader of such a statement to compare the results over the different periods for better understanding and detailed analysis of variation of line-wise items of Income StatementIncome StatementThe income statement is one of the company's financial reports that summarizes all of the company's revenues and expenses over time in order to determine the company's profit or loss and measure its business activity over time based on user more.

The common size comparative income statement format combines several Income Statements as columns in a Single Statement, which helps the reader analyze trends and measure the performance over different reporting periods.

It can also be used to compare two different companies’ operating metrics. Such Analysis helps in comparing the performance with another business, which can analyze how companies react to market conditions affecting the companies belonging to the same Industry.

Thus Comparative Income Statement is an essential tool through which the result of operations of a business (or, say, the operation of the business of different companies) over multiple accounting periods can be analyzed to understand the various factors contributing to the change over the period for better interpretation and analysis.

The common size comparative income statement shows absolute figures, changes in absolute figures, unlimited data in terms of percentages, and an increase (or decrease) in percentages over the different periods. With the help of a Comparative Income Statement format in one snapshot, a company’s performance over different periods can be compared, and changes in expense items and Sales can be easily ascertained.

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How To Prepare?

The process of preparation of financial statement and presenting it for comparison over different accounting periods is called comparative income statement. It is an important process which involves comparative income statement analysis of revenue, expense, profits, etc. Preparation and presentation of this information is necessary and useful for both the company and investors. The steps for the same are given below:

  • Identify the time period– It is important to decide between which time period the comparison has to be made. Ideally they cover two or more accounting periods, usually two quarters or two years.
  • Data accumulation – Next is accumulation or collection of data for the comparison. The financial data should include revenue, COGS, all operating and non-operating expenses, the incomes, tax details, etc. It is necessary for the statements to be complete and accurate.
  • Formating – The data and the statements collected for comparison purpose should be properly formatted so that it dosed not contain extra details which are not relevant and at the same time it is easy to understand and do comparative income statement analysis.
  • Calculate changes – The next step is to calculate the chaed amount along with the percentage change between the periods for each and every line item. Then we need to deduct the value or the amount of the earlier period from the later period to get the changed amount. To get the percentage change, we need to divide the change by the earlier amount and then multiply it by 100.
  • Calculate totals and subtotal – A god presentation will involve proper segregation of the totals and subtotals so that all calculations are clearly visible and can be interpreted by anyone.
  • Trend analysis – Then comes the analysis part where the trends and patterns are identified and the comparison is made. The increase or decreae in revenue, expenses, profits are evaluated to identify and understand the reason for such changes. If there is any significant fluctuation or important note for the readers and investors, they should be explained with proper comments.
  • Review – It is always a good idea to review the preparation to that any other important information that should be include can be pointed out and presented.

However, this document is not a wholesome process for analysis. It is important to prepare comparative income statement which should be accompanied by other financial statements in order to make the comparison useful.


The various types of income statements comparisons that are used are as follows:

#1 – Horizontal Analysis

One of the popular techniques of Comparative Income Statement shows the change in amount both in absolute and percentage terms over some time. It helps in easy analysis of trends and, as such, is also known as Trend Analysis. One can easily observe growth patterns and seasonality using the Horizontal Analysis TechniqueHorizontal Analysis TechniqueHorizontal analysis interprets the change in financial statements over two or more accounting periods based on the historical data. It denotes the percentage change in the same line item of the next accounting period compared to the value of the baseline accounting more.

An Illustration showing Horizontal Analysis is depicted below:

#2 – Vertical Analysis

Another technique that exhibits Comparative Income Statement in terms of the relative size of line items is the Vertical Analysis. This technique enables easy comparison of Income statements of companies of different sizes. It shows each item on the Income Statement as a percentage of Base figures (usually the Sales figure) with the statement. Under this, all components of Income statements are shown as a percentage of sales, such as Gross ProfitGross ProfitGross Profit shows the earnings of the business entity from its core business activity i.e. the profit of the company that is arrived after deducting all the direct expenses like raw material cost, labor cost, etc. from the direct income generated from the sale of its goods and more, Net Profit, Cost of Sales, etc., which makes it very handy to use even when comparing differently as it removes the Size biases and makes the analysis more straightforward and understandable. It is mostly used for individual statements for a reporting periodIndividual Statements For A Reporting PeriodA reporting period is a month, quarter, or year during which an organization's financial statements are prepared for external use uniformly across a period of time in order for the general public and users to interpret and evaluate the financial more but can also be used for timeline analysis.


Let’s understand how to prepare comparative income statement with the help of some suitable examples.

Example #1

ABC Limited has provided the following information about its two accounting periodsAccounting PeriodsAccounting Period refers to the period in which all financial transactions are recorded and financial statements are prepared. This might be quarterly, semi-annually, or annually, depending on the period for which you want to create the financial statements to be presented to investors so that they can track and compare the company's overall more, i.e., 2016 and 2017.

Prepare a Comparative Income Statement and interpret the basic findings.

Particulars2016 (Amount in USD)2017 (Amount in USD)
Net Sales200000250000
Cost of Goods Sold150000180000
Selling, General and Administrative Expenses2500030000
Other Income1200018000

Comparative Income Statement format of ABC Limited for the period ended 2016 and 2017

Particulars2016 (Amount in USD)2017 (Amount in USD)Absolute ChangePercentage Change
Net Sales2000002500005000025%
Less: Cost of Goods Sold1500001800003000020%
Gross Profit50000700002000040%
Less: Selling, General and Administrative Expenses2500030000500020%
Net Operating Profit25000400001500060%
Add: Other Income1200018000600050%
Earnings before Interest and Taxes37000580002100056.76%
Less: Interest170001800010005.88%
Earnings before Taxes200004000020000100%
Less: Taxes8000160008000100%
Net Profit120002400012000100%

Based on the above Comparative Income Statement of ABC Limited, it can be analyzed how an increase in sales (25% over the previous year) has impacted the Net profit (increased by 100% in absolute terms over the previous year) and how various line items have contributed. Basic Analysis includes the following:

Example #2

Let us now look at an example of Colgate’s Horizontal analysis.

We can find the growth rate of Net Sales of 2015; the formula is (Net Sales 2015 – Net Sales 2014) / Net Sales 2014. Likewise, we can find the growth rates of other line items using a similar formula.Horizontal Analysis - Income Statement Colgate

We note the following –

An Illustration showing Vertical AnalysisVertical AnalysisVertical analysis is a kind of financial statement analysis wherein each item in the financial statement is shown in percentage of the base figure. The formula is: (Statement line item / Total base figure) X 100read more is depicted below.

Thus we can see how Comparative Income Statement helps ascertain the changes of various components of expenses and identify the reason for changes that help the management in decision making in the future.


Just as every financial concept has its own advantage and disadvantage, so does this concept. Let us try to analyse the advantages of comparative income statement in management accounting as given below:


Let us go through the disadvantages of the concept of comparative income statement in management accounting in detail.

Frequently Asked Questions (FAQs)

What is the importance of a comparative income statement?

A comparative income statement shows the multiple accounting period outcomes in separate columns. This format enables the reader to compare the numerous historical period’s effects, looking at how a business did over the period.

What is comparative income statement profit and loss?

Comparative statement of profit and loss is the statement’s horizontal analysis of profit and loss. It displays the functional outcomes for the compared accounting periods and data absolute amount and percentage changes from period to period.

How do you find the percentage of a comparative income statement?

Using a comparative income statement, one may compare income statements from various-sized companies. To reach the competing businesses, one must know the revenue percentage for each line item. Moreover, divide each line item by the revenue to find the percentage of income. Then, multiply the number by 100 to obtain a percentage.

This article has been a guide to what is Comparative Income Statement. We explain It with examples, how to prepare it along with advantages, disadvantages & types. You may learn more about financial analysis from the following articles –

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