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When a business wants to get a view of how the company is progressing or regressing over a period of time, a comparative income statement is often used as that starting point to get an overall picture or help identify potential issues. The comparative income statement is prepared with multi-columns across the page, identifying each period of income. Using this format allows an analyst to see historical trends in income over the various periods as identified in the columns. Multiple rows are often also included to specify different sources of income as well. Together, the rows and columns provide the business analyst with an overall picture concerning the performance of the business in general and the performance of individual income sources.
For presentation purposes, the columns on a comparative income statement are usually arranged in a chronological order starting with the most recent time period. Therefore, the most recent time period will be in the column right next to the rows that list the types of income. Each earlier time period is then listed in regression to the right of the page. For example, the listing of June, July and August would demonstrate a multi-month presentation using this format.
Less common is the opposite format where times periods are specified in reverse. Listed right next to the rows denoting income is the furthest time period specified. Thereafter, progressing in time to the most recent period at the end of the statement, each additional time period is listed. As an example, such time periods would be in the order of March, February and January. Considering readability, however, this format is not often used since it does not readily articulate the current state of income, which is often a concern to the analyst.
Gross income is usually listed first on the comparative income statement, normally consisting of one page. On the next page, all operating expenses are usually deducted from the time period specified in each column. Total operating expenses are usually denoted for each time period and subtracted from the gross income to show the total net income from all sources.
Business analyst’s find this information on the comparative income statement just as important at the trend in gross income. If gross income, for example, shows progressive growth, but net income shows regression, this likely indicates a bottleneck in operations which will manifest in operating expenses. Looking at the operating expenses, an analyst can identify from period to period where this bottleneck is likely occurring and use that information to determine what other reports might be relevant to identifying the problem and fixing it.
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