Accountancy Part BAnalysis of Financial Statements

Which of the following is not the tool for analysis of Financial Stat…

Which of the following is not the tool for analysis of Financial Statements?

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → Balance sheet

A tool of analysis is a technique used to study the financial statements, while the balance sheet is one of the financial statements being studied. It is the raw material of analysis, not a method of analysing.

Option (1) Comparative Statements — A tool of analysis. They set the figures of two or more periods side by side.
Option (2) Common Size Statements — A tool of analysis. Each item is shown as a percentage of a common base.
Option (3) Trend Analysis — A tool of analysis. It studies results and position over a series of years.

NCERT (2026-27 edition):
Tools of Financial Analysis – “Commonly used tools of financial analysis are: Comparative statements, Common size statement, trend analysis, ratio analysis, and cash flow analysis.”

NCERT (2026-27 edition):
Summary – “Financial Statements: Financial statements are the end products of accounting process, which reveal the financial results of a specified period and financial position as on a particular date. Financial Statements are prepared and published by corporate undertakings for the benefit of various stakeholders. These statements include Statement of profit and loss and balance sheet.”

Which of the following is not the tool for analysis of Financial Statements?

Answer & explanation

Correct answer: option 4

The correct answer is Option (4) → Balance sheet

Option (1) Comparative Statements — A tool of analysis. They set the figures of two or more periods side by side.
Option (2) Common Size Statements — A tool of analysis. Each item is shown as a percentage of a common base.
Option (3) Trend Analysis — A tool of analysis. It studies results and position over a series of years.