Question

Common size financial statements are mostly prepared in the form of:

• A. Ratio
• B. Percentage
• C. Both (A) and (B)
• D. None of these

Hint:

Common-size statements = Comparison tool where items are shown as % of base figure (sales or total assets).

Answer 1

The Correct Option is B

Step 1: Define common-size statements.
In common-size statements, each item is expressed as a percentage of a common base: - In Balance Sheet → percentage of total assets/liabilities.
- In Profit & Loss A/c → percentage of net sales.
Step 2: Why percentage?
The objective is to make comparison easy by converting absolute figures into relative percentages. Ratios are used separately in ratio analysis, not in common-size statements.
Step 3: Conclude.
Thus, common-size statements are prepared in the form of percentage.
Final Answer: \[ \boxed{\text{Percentage}} \]