Accountancy Part BAnalysis of Financial Statements

Which of the following item is not a tool of financial statement anal…

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

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → Statement of Profit and Loss

A tool of analysis is a technique applied to the financial statements to study them. The Statement of Profit and Loss is itself one of the financial statements that is analysed, not a technique for analysing them.

Option (1) Trend Analysis — A tool of analysis. It studies the percentage change of items over a series of years.

Option (3) Cash flow statement — A tool of analysis. Cash flow analysis studies the actual inflow and outflow of cash.

Option (4) Comparative statements — A tool of analysis. They compare the figures of two or more periods.

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):
Major Parts of an Annual Report – “… An annual report contains basic financial statements, viz., Balance Sheet, Statement of Profit and Loss and Cash Flow Statement.”