Preparation of Common Size Income Statement
A Common-size Income Statement has the following six columns:
1. First Column: In the first column, the items of the Income Statement (Statement of Profit & Loss); i.e., revenue/income and expenses are recorded.
2. Second Column: In the second column, Note No. given against the item in the Income Statement of the company is recorded.
3. Third Column: In the third column, the amounts of the previous year are written in case the Common-size Statement for different periods of the same firm is being prepared. And if the Statement is being prepared for two different firms, then the amount relating to the first firm (say, X Ltd.) is recorded.
4. Fourth Column: In the fourth column, the amounts of the current year are written in case the Common-size Statement for different periods of the same firm is being prepared. And if the Statement is being prepared for two different firms, then the amount relating to the other firm (say, Y Ltd.) is recorded.
5. Fifth Column: In the fifth column, the percentage of different items of the Income Statement of the previous year or first firm (as the case may be) to Revenue from Operations; i.e., Net Sales (taken as 100) is recorded.
6. Sixth Column: In the sixth column, the percentage of different items of the Income Statement of the current year or any other firm (as the case may be) to Revenue from Operations; i.e., Net Sales (taken as 100) is recorded.