Importance of Comparative Balance Sheet

1. More Realistic Approach: A Balance Sheet only shows the balances of Assets, and Equity and Liabilities of a company after closing the books of accounts at a certain date. However, a Comparative Balance Sheet not only shows the balances of Assets, and Equity and Liabilities at a certain date, but also the extent to which those figures have increased or decreased between these dates. 

2. Emphasis on Changes: A Balance Sheet emphasises on the status of the company; however, a Comparative Balance Sheet emphasises on the change.

3. Reflects Trend: A Comparative Balance Sheet allows the user to study the nature, size, and trend of change in various items of a Balance Sheet. Therefore, it is more useful than a Balance Sheet of a single year.

4. Link between Balance Sheet and Statement of Profit & Loss: A Comparative Balance Sheet acts as a link between the Balance Sheet and Statement of Profit & Loss of a company as it shows the effects of business operations on its Assets, and Equity and Liabilities.

5. Facilitates Planning: A Comparative Balance Sheet helps an organisation in determining the trends of its growth or decrease in the value of its Assets, and Equity and Liabilities. The trends ultimately help in planning the future course of action of the firm. 

A statement that helps in the comparative study of the components of a company’s balance sheet over a period of two or more years, both in absolute and percentage form, is known as a Comparative Balance Sheet. For the estimation of an organization’s future progress, it is essential to look into its past performance, for which performing a comparative study of two or more years of company financial statements becomes necessary. It is a horizontal type of analysis and not only provides the absolute figures of various years, but also, the columns to indicate any increase or decrease in these figures from one year to another in absolute and a percentage form. One can form an opinion on the progress of an enterprise based on the comparative statements.