Accountancy Part BAnalysis of Financial Statements

Which of the following is not a tool of financial statement analysis?

Answer & explanation

Correct answer: option 3

The correct answer is Option (3) → Bank Reconciliation Statement

A tool of financial statement analysis takes the figures of the statement of profit and loss and the balance sheet and studies them, across years or against a base, to judge profitability and financial position. A Bank Reconciliation Statement does not work on those statements at all: it explains the difference between the bank balance in the cash book and in the bank’s passbook, and analyses no financial statement.

Option (1) Common Size Statement — A tool of analysis. It shows each item as a percentage of a common base, such as revenue from operations or total assets.
Option (2) Comparative Statement — A tool of analysis. It sets out the figures of two or more periods side by side; it is also called horizontal analysis.
Option (4) Trend Analysis — A tool of analysis. It studies the percentage changes over a series of years against a base year.

NCERT (2026-27 edition):
Tools of Analysis of Financial Statements – “… In this chapter, we shall have a brief idea about the first three techniques, viz., comparative statements, common size statements and trend analysis. The ratio analysis and cash flow analysis is covered in detail in Chapters 5 and 6 respectively.”