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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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BuyFindarrow_forward

Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

That is the difference between horizontal and vertical analysis of financial statements?

To determine

Concept Introduction:

Vertical Analysis:

Vertical Analysis is used to analyze the % of items in statement for a particular period as the % of total amount. Vertical Analysis is done for particular period for different items. For example, an analysis of % of current assets as % of Total assets for a particular year is done using the Vertical analysis.

Horizontal Analysis:

Horizontal Analysis is used to analyze the trend of a particular item. Horizontal Analysis is done for particular items for different periods. For example, an analysis of trend of sales for several years is done using the horizontal analysis.

To Indicate:

The difference between the vertical and horizontal analysis of financial statements

Explanation

Financial Statement analysis is done using the components of financial statement. These components are Balance sheet, Income statement, Statement of Cash flows, etc. Annual report of a company contains financial statement of that year and previous year for comparison. If the company has subsidiaries or segments, the financial statement shall be consolidated for the whole business of the company.

Vertical Analysis is used to analyze the % of items in statement for a particular period as the % of total amount...

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