Accountancy Part BAnalysis of Financial Statements

This item is not used as a tool for analysis of financial statements:-

Answer & explanation

Correct answer: option 2

The correct answer is Option (2) → Profit & Loss Account

Financial analysis studies the figures of the financial statements with the help of certain tools. The Profit & Loss Account (Statement of Profit and Loss) is one of the statements being analysed, not a tool used to analyse them.

Option (1) Cash Flow Statement — A tool of analysis. Cash flow analysis shows where cash came from and where it went during the year.
Option (3) 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 (4) Ratio Analysis — A tool of analysis. It relates two figures of the statements, such as current assets and current liabilities, to judge liquidity, solvency or profitability.

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.”