Question

Question: Which items are usually assigned a 100% value on (a) a common-size balance sheet and (b) a common-size income statement?

Short answer

(a) Total assets or total liabilities are assigned 100% value in common-size balance sheet.

(b) Net sales or revenue is considered as the 100% value in the common-size income statement.

Step-by-step solution

Definition of income statement

The company prepares the income statement at the end of the accounting period to determine the profit or loss incurred by the company in that period.

Assigning of 100% value in common size statements

(a) In the common-size balance sheet, the amount of total assets or total liabilities is assigned as the 100% value. The value of the other items on the balance sheet is compared by using the total assets or liabilities as the base of 100%.

(b) The revenue amount is assigned as the 100% value in a common-size income statement. Revenue is used as the base of 100% from which other income statement items are compared.