Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

14. Financial Statement Analysis

Horizontal Analysis

Financial Accounting

14. Financial Statement Analysis

Horizontal Analysis

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Multiple Choice

Horizontal analysis of comparative financial statements includes:

Calculating each item as a percentage of a base-year amount within a single period.

Preparing financial statements in accordance with International Financial Reporting Standards (IFRS).

Comparing financial statement items over two or more periods to identify trends and changes in amounts.

Analyzing the relationship between different accounts within the same period.

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Verified step by step guidance

Understand the concept of horizontal analysis: Horizontal analysis involves comparing financial statement items over two or more periods to identify trends, changes, and growth patterns in amounts.

Identify the financial statement items to be analyzed: These could include revenue, expenses, assets, liabilities, or equity accounts from the comparative financial statements.

Calculate the change in amounts for each item: Subtract the amount from the earlier period (base year) from the amount in the later period. Represent this change as ΔAmount = LaterPeriodAmount - BaseYearAmount.

Determine the percentage change for each item: Use the formula PercentageChange = (ΔAmount / BaseYearAmount) × 100. This helps in understanding the relative growth or decline in each item.

Interpret the results: Analyze the trends and changes in the financial statement items to identify patterns, such as increasing revenue or decreasing expenses, and assess the financial health of the entity over time.