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Common Size Statements, ISC Class 12 Accounts Analysis

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AccountsISC Class 12 · Financial Statement Analysis

Common Size Statements: Balance Sheet and Statement of Profit and Loss, ISC Class 12 Accounts

Updated 17 October 2026 · Draft, not yet fact-checked

A common size statement expresses every item as a percentage of one base figure. In a common size Balance Sheet each item is a percentage of total assets (assets side) or of total equity and liabilities (liabilities side); in a common size Statement of Profit and Loss each item is a percentage of Revenue from operations. Percentages are then comparable across years and across firms of different size.

Every item is divided by one base and multiplied by 100: revenue for Profit and Loss, total assets or total equity and liabilities for the Balance Sheet.

Illustration drawn for QuestionBuddy.

Understand Common Size Balance Sheet and Statement of Profit and Loss

Idea. A rupee figure alone does not show how large an item is within its statement. A common size statement turns every figure into a percentage of a single base so that the make-up of the statement becomes visible. It is also called vertical analysis, because the percentages are worked out down a column.

Bases fixed by the ISC syllabus

  • Common size Balance Sheet: as a percentage of total assets (for assets) and total liabilities i.e. total equity and liabilities (for the liabilities side).
  • Common size Statement of Profit and Loss: as a percentage of Revenue from operations. Other Income and Total Revenue are therefore also expressed against Revenue from operations, so Total Revenue can exceed 100%.

How to prepare. Use the same layout as the comparative statement but replace the change columns with percentage columns: Particulars | Year 1 (₹) | Year 2 (₹) | % of base Year 1 | % of base Year 2. Each percentage = item ÷ base × 100. The base itself shows 100% (for the Balance Sheet) and the items of one side add up to 100%. As with comparative statements, they are made from the Balance Sheets and Statements of Profit and Loss without notes to accounts.

What the percentages tell. In the Balance Sheet, a rising share of long-term borrowings in total liabilities signals growing dependence on outsiders; a rising share of inventories in assets may signal slow sales. In the Statement of Profit and Loss, the share of materials, employee cost and other expenses shows which costs absorb the revenue, and profit after tax as a percentage of revenue is the net margin.

Comparison with the comparative statement. The comparative statement shows the *movement* in rupees and percentage, over time. The common size statement shows the *structure* at a point in time, and it can compare firms of different sizes directly.

Significance. It reveals the relative importance of items, allows inter-firm comparison despite size differences, and helps judge the capital structure and cost structure.

Limitations. It shares the weaknesses of all statement analysis: historical figures, no allowance for price changes, dependence on uniform accounting policies, and no information about non-financial factors. A percentage also hides the absolute size of a change.

Common Size Balance Sheet and Statement of Profit and Loss: key facts

Common size percentage
  • Item
  • divided by Base figure
  • multiplied by 100
Base depends on the statement.
Base for the Balance Sheet
Total assets (assets side) | Total equity and liabilities (liabilities side)
Each side adds up to 100%.
Base for the Statement of Profit and Loss
  • Revenue from operations
  • equals 100%
  • Total Revenue may exceed it
Other Income is also divided by Revenue from operations.
Net margin from the common size statement
  • Profit after tax
  • divided by Revenue from operations
  • multiplied by 100
Equals the last percentage line.

How to answer Common Size Balance Sheet and Statement of Profit and Loss questions

Decide the base first. Everything else is division.

  1. 1Balance Sheet: total each side; use that total as the base for that side.
  2. 2Statement of Profit and Loss: use Revenue from operations as the base, even for Other Income and Total Revenue.
  3. 3Divide every line, sub-total and total by the base and multiply by 100.
  4. 4Check that the items on each side of the Balance Sheet add up to 100%.
  5. 5Write a one-line comment only if asked.

Common Size Balance Sheet and Statement of Profit and Loss in real life

The idea, met in an everyday situation. Answer the question in your own words, then compare with the model answer. The one-line hook is what to remember.

Comparing firms of different sizes

Suppose a small tea stall has revenue of ₹2,00,000 and spends ₹1,20,000 on materials, while a large tea chain has revenue of ₹50,00,000 and spends ₹32,50,000 on materials.

Which business spends a larger share of its revenue on materials?

Try it first, then show the solutionSolution
  1. Stall: 1,20,000 ÷ 2,00,000 × 100 = 60%.
  2. Chain: 32,50,000 ÷ 50,00,000 × 100 = 65%.

Answer: The chain spends 65% of its revenue on materials against 60% for the stall, though its rupee figure is far larger.

Memory hook: Percentages make unequal firms comparable.

Tricks to remember Common Size Balance Sheet and Statement of Profit and Loss

Short memory aids. Say each one aloud once, then use it on a question the same day.

  • Down the column

    Common size is vertical analysis: divide each item by one base in the same column.

    Use it when: Distinguishing from comparative statements.

  • Revenue from operations is 100

    For profit and loss the base is Revenue from operations only, not Total Revenue.

    Use it when: Choosing the base.

  • Each side sums to 100

    Balance Sheet percentages on one side must total 100.

    Use it when: Self-check.

Common Size Balance Sheet and Statement of Profit and Loss: solved examples

Ordered from board level to HOTS. Try each one before you open the solution.

Example 1: Choosing the base · 1 mark · MCQBoard level

In a common size Statement of Profit and Loss every item is expressed as a percentage of:
(a) Total Revenue
(b) Revenue from operations
(c) Profit after tax
(d) Total Expenses

Try it first, then show the solutionSolution
  1. The ISC syllabus fixes the base as Revenue from operations.

Answer: (b) Revenue from operations

Example 2: Comparative versus common size · 3 marks · Short answerBoard level

Distinguish between a comparative statement and a common size statement on any three points. (3 marks)

Try it first, then show the solutionSolution
  1. Purpose: comparative shows the movement over time; common size shows the structure of one statement.
  2. Columns: comparative has absolute and percentage change; common size has percentage of a base.
  3. Base: comparative uses the earlier year or first firm; common size uses total assets, total liabilities or Revenue from operations.

Answer: Comparative: movement, change columns, earlier-year base. Common size: structure, percentage-of-base columns, base total assets/liabilities/revenue.

Example 3: Common size Statement of Profit and Loss · 6 marks · Long answerHarder board level

Clover Ltd. gives the following figures for 2024-25 and 2025-26. Express each line of its Statement of Profit and Loss as a percentage of the correct base for both years. Revenue from operations ₹5,00,000 and ₹6,00,000; Other income ₹25,000 and ₹30,000; Cost of materials consumed ₹2,50,000 and ₹3,00,000; Employee benefits expense ₹60,000 and ₹72,000; Finance costs ₹20,000 and ₹18,000; Depreciation ₹30,000 and ₹36,000; Other expenses ₹40,000 and ₹48,000. Tax rate 30%. (6 marks)

Try it first, then show the solutionSolution
  1. Total Revenue: 5,25,000 and 6,30,000. Total Expenses: 4,00,000 and 4,74,000.
  2. Profit before tax: 1,25,000 and 1,56,000. Tax at 30%: 37,500 and 46,800. Profit after tax: 87,500 and 1,09,200.
  3. Each percentage is item ÷ Revenue from operations × 100 (5,00,000 and 6,00,000).
  4. Profit after tax is 17.50% of revenue in 2024-25 and 18.20% in 2025-26.

Answer:

Particulars2024-25 (₹)2025-26 (₹)% of revenue from operations 2024-25% of revenue from operations 2025-26
I. Revenue from operations5,00,0006,00,000100.00%100.00%
II. Other Income25,00030,0005.00%5.00%
III. Total Revenue5,25,0006,30,000105.00%105.00%
Cost of materials consumed2,50,0003,00,00050.00%50.00%
Employee benefits expense60,00072,00012.00%12.00%
Finance costs20,00018,0004.00%3.00%
Depreciation and amortisation expense30,00036,0006.00%6.00%
Other expenses40,00048,0008.00%8.00%
IV. Total Expenses4,00,0004,74,00080.00%79.00%
V. Profit before tax1,25,0001,56,00025.00%26.00%
VI. Tax at 30%37,50046,8007.50%7.80%
VII. Profit after tax87,5001,09,20017.50%18.20%

Example 4: Common size Balance Sheet · 6 marks · Long answerHarder board level

Prepare a common size Balance Sheet of Dune Ltd. from: Share capital ₹4,00,000 and ₹4,00,000; Reserves and surplus ₹1,00,000 and ₹1,60,000; Long-term borrowings ₹2,00,000 and ₹1,60,000; Trade payables ₹70,000 and ₹90,000; Short-term provisions ₹30,000 and ₹40,000; Property, plant and equipment ₹4,80,000 and ₹4,60,000; Non-current investments ₹80,000 each year; Inventories ₹1,40,000 and ₹1,70,000; Trade receivables ₹80,000 and ₹1,00,000; Cash and cash equivalents ₹20,000 and ₹40,000 (as at 31st March 2025 and 2026). (6 marks)

Try it first, then show the solutionSolution
  1. Total equity and liabilities = total assets = ₹8,00,000 (2025) and ₹8,50,000 (2026).
  2. Divide each liability by its own total and each asset by total assets, then multiply by 100.
  3. Check: percentages on each side add up to 100% in both years.
  4. Long-term borrowings fall from 25.00% to 18.82% of the total, so dependence on outsiders is reduced.

Answer:

Particulars31 March 2025 (₹)31 March 2026 (₹)% of total 2025% of total 2026
Equity and Liabilities    
Share capital4,00,0004,00,00050.00%47.06%
Reserves and surplus1,00,0001,60,00012.50%18.82%
Long-term borrowings2,00,0001,60,00025.00%18.82%
Trade payables70,00090,0008.75%10.59%
Short-term provisions30,00040,0003.75%4.71%
Total8,00,0008,50,000100.00%100.00%
Assets    
Property, plant and equipment4,80,0004,60,00060.00%54.12%
Non-current investments80,00080,00010.00%9.41%
Inventories1,40,0001,70,00017.50%20.00%
Trade receivables80,0001,00,00010.00%11.76%
Cash and cash equivalents20,00040,0002.50%4.71%
Total8,00,0008,50,000100.00%100.00%

Example 5: Reading two cost structures · 3 marks · Short answerHOTS / competency

Two firms, P and Q, each have revenue from operations of ₹20,00,000. Their common size statements show (as % of revenue) cost of materials 50% and 58%, employee benefits 15% and 10%, other expenses 15% and 12%, depreciation and finance costs together 5% and 6%. Ignoring other income and tax, find the profit before tax of each in rupees, and say which firm controls materials better and by how much Q's profit would rise if it matched P on materials. (3 marks)

Try it first, then show the solutionSolution
  1. P: total costs = 50 + 15 + 15 + 5 = 85%, so profit before tax = 15% of 20,00,000 = ₹3,00,000.
  2. Q: total costs = 58 + 10 + 12 + 6 = 86%, so profit before tax = 14% of 20,00,000 = ₹2,80,000.
  3. P controls materials better: 50% against 58%.
  4. If Q matched P on materials, its costs would fall by 8 percentage points, so profit before tax would rise by 8% of 20,00,000 = ₹1,60,000, from ₹2,80,000 (14%) to ₹4,40,000 (22%).

Answer: PBT: P ₹3,00,000 (15%); Q ₹2,80,000 (14%). P controls materials better by 8 percentage points (50% against 58%). If Q matched P on materials, its profit before tax would rise by 8% of ₹20,00,000 = ₹1,60,000, from ₹2,80,000 to ₹4,40,000 (14% to 22% of revenue).

Where students lose marks in Common Size Balance Sheet and Statement of Profit and Loss

The slips examiners see most often, and what to write instead.

  • Mistake: Using Total Revenue as the base in the profit and loss statement

    Assuming the biggest income figure is the base.

    Wrong working

    PAT % = 87,500 ÷ 5,25,000 × 100 = 16.67%

    Right working

    PAT % = 87,500 ÷ 5,00,000 × 100 = 17.50%

    Do this: The syllabus base is Revenue from operations.

    Usually costs: 2-3 marks.

  • Mistake: One base for both sides of the Balance Sheet

    Using total assets for liabilities too.

    Wrong working

    Reserves % = 1,00,000 ÷ total assets

    Right working

    Reserves % = 1,00,000 ÷ total equity and liabilities

    Do this: Each side has its own total; the two totals are equal in a balanced statement.

    Usually costs: 1 mark.

  • Mistake: Percentages that do not add to 100

    Rounding or skipping an item.

    Wrong working

    50.00 + 12.50 + 25.00 + 8.33 + 4.16 = 99.99

    Right working

    50.00 + 12.50 + 25.00 + 8.33 + 4.17 = 100.00

    Do this: Round carefully and re-add the side.

    Usually costs: 1 mark.

  • Mistake: Writing Total Revenue as 100%

    Treating the subtotal as the base.

    Wrong working

    Total Revenue = 100%

    Right working

    Total Revenue = 105.00% when Other Income is 5% of revenue

    Do this: Only Revenue from operations is 100%.

    Usually costs: 1 mark.

Exam tips

  • State the base in the column heading, for example "% of Revenue from operations".
  • Put the totals first on a rough sheet; every percentage depends on them.
  • Keep two decimals; say so if you round.
  • If asked to comment, refer to one asset-side and one liability-side change.

Practice questions on Common Size Balance Sheet and Statement of Profit and Loss

Write each answer on paper first. Open the hint only if you are stuck, and the answer only when you have finished.

  1. Q1 · 1 mark · MCQBoard level

    Inventories of ₹1,20,000 form what percentage of total assets of ₹8,00,000 in a common size Balance Sheet?
    (a) 6.67%
    (b) 15%
    (c) 12%
    (d) 85%

    Hint

    Divide by the base.

    Answer

    (b) 15%

  2. Q2 · 3 marks · Short answerBoard level

    A firm earned Revenue from operations of ₹4,00,000 and incurred cost of materials ₹2,00,000, employee benefits ₹48,000 and other expenses ₹32,000. Tax is 25% of profit before tax. Show every line, down to profit after tax, as a percentage of the base. (3 marks)

    Hint

    Profit before tax = 4,00,000 − 2,80,000.

    Answer

    Materials 50.00%; employee 12.00%; other 8.00%; total expenses 70.00%; profit before tax 30.00% (₹1,20,000); tax 7.50% (₹30,000); profit after tax 22.50% (₹90,000).

  3. Q3 · 3 marks · Short answerHarder board level

    Total assets are ₹12,00,000. Property, plant and equipment form 45% of total assets, inventories 20%, trade receivables 15%, cash and cash equivalents 10% and the remainder is non-current investments. Find each amount. (3 marks)

    Hint

    The remaining percentage is 10.

    Answer

    PPE ₹5,40,000; inventories ₹2,40,000; trade receivables ₹1,80,000; cash ₹1,20,000; non-current investments (10%) ₹1,20,000. Total ₹12,00,000.

  4. Q4 · 6 marks · Long answerHarder board level

    The equity and liabilities of Garnet Ltd. on 31st March 2025 and 2026 were: Share capital ₹6,00,000 and ₹6,00,000; Reserves and surplus ₹1,50,000 and ₹2,10,000; Long-term borrowings ₹3,00,000 and ₹2,40,000; Trade payables ₹1,00,000 and ₹1,30,000; Short-term provisions ₹50,000 and ₹20,000. Prepare the liabilities side of the common size Balance Sheet and comment on the change in borrowings. (6 marks)

    Hint

    Both totals are 12,00,000.

    Answer

    2025: 50.00%, 12.50%, 25.00%, 8.33%, 4.17%. 2026: 50.00%, 17.50%, 20.00%, 10.83%, 1.67%. Long-term borrowings fall from 25.00% to 20.00% of the total, reducing reliance on outsiders, while reserves grow from 12.50% to 17.50%.

  5. Q5 · 3 marks · Short answerHOTS / competency

    Revenue from operations rose from ₹10,00,000 to ₹12,00,000. Employee benefits expense was 10% of revenue in the first year and 12% in the second. Find the percentage increase in employee cost and explain what the common size figures reveal that the revenue growth alone does not. (3 marks)

    Hint

    Employee cost is 1,00,000 and 1,44,000.

    Answer

    Employee cost rose from ₹1,00,000 to ₹1,44,000, an increase of 44%, against revenue growth of 20%. The common size share rose from 10% to 12%, showing that this cost is absorbing more of each rupee of revenue.

Test your recall

Answer in your head or on paper first, then open the card. Pulling an answer out of memory makes it stick far better than re-reading.

  1. 1.Base of common size P&L?Show answer

    Revenue from operations.

  2. 2.Base of the assets side of common size Balance Sheet?Show answer

    Total assets.

  3. 3.Another name for common size analysis?Show answer

    Vertical analysis.

  4. 4.Can Total Revenue show more than 100%?Show answer

    Yes, if Other Income is positive.

  5. 5.Percentages on one side of the Balance Sheet sum to?Show answer

    100.

Common Size Balance Sheet and Statement of Profit and Loss: frequently asked questions

Why use percentages instead of rupees?

Percentages let you compare firms of different sizes and the same firm across years on the same scale.

Is Total Revenue the base in the ISC format?

No. The base is Revenue from operations.

Do I need notes to accounts?

No. The syllabus says statements are made without notes.

How is a common size statement different from a comparative one?

It shows structure, not change; see the previous topic page for comparative statements.