What Is a Comparative Balance Sheet: Format and Example

Comparative financial statements are reports that compare a company’s financial statements at different time periods. They help identify trends, and analysing them provides insights into decisions that would best suit the company’s growth.

Financial statements can include the income statement, cash flow statement, and balance sheet. The comparative balance sheet is one of the fundamental tool for analysing a company.

While a traditional balance sheet shows the financial position, a comparative balance sheet is superior, offering advanced analysis of the company.

Here, you will learn about the comparative balance sheet, its format, examples, and how to compare it.

So, let’s explore the sheet.

What is a Comparative Balance Sheet

A comparative balance sheet compares a company’s two balance sheets from different accounting periods. In other words, it compares the entire balance sheet of the current period with previous periods side by side.

An example could be comparing ABC company’s current year’s balance sheet with the previous year, aiding trend analysis and decision-making for future plans.

Professionals, investors, creditors, and analysts use this report to evaluate a company’s performance and ability.

Comparing balance sheets from different accounting periods is easy, using software or manual editing in its format. It’s not limited to annual periods; many software options allow for weekly, monthly, or half-yearly comparisons.

Understand Comparative Balance Sheet

To understand the comparative balance sheet, you should have an idea about the traditional balance sheet and its format.

A balance sheet has three main sections: Assets, Liabilities, and Shareholder’s equity.

Assets: Things the company owns, divided into short-term (e.g., accounts receivable, inventory) and long-term (e.g., land, equipment).

Liabilities: Things the company owes, divided into short-term (e.g., accounts payable, tax expense) and long-term (e.g., bank loans).

Shareholder’s equity: Shows the equity of shareholders in the company, generally including issued stock and retained earnings.

comparative balance sheet format

Here’s the format of the comparative balance sheet:

First column: Lists all accounts and items of the balance sheet, like inventory, debt, etc.

Second column: Records figures from the previous year. It’s not compulsory to compare with the previous year, but using last year’s sheet is better.

Third column: Records figures from the current year, usually located on the right side.

Fourth column: Shows the changes during the accounting period, calculating the difference between the two periods for each item.

\text{Absolute changes} = \text{Current year} - \text{Previous year}


fifth column: Displays the percentage change from the previous year to the current year.

\text{Change in percentage} = \frac{\text{Current year} - \text{Previous year}}{\text{Current year}} \times 100


Comparative balance sheet example

Here, we’ve taken the example of the balance sheet data of Amazon for the years 2021 and 2022. Let’s compare both sheets and calculate the changes.

Example of Amazon company's comparative balance sheet, year 2021 and 2022

Example Breakdown:

First column includes all elements of the balance sheet, such as cash on hand and long-term debt.

Second column shows figures for the year 2021, while the third column shows data from the year 2022.

Fourth column calculates absolute changes And Fifth column Calculates the change in percentages.

Analysing this example, it indicates that Amazon’s cash decreased by 26.10% from 2021 to 2022. On the other side, current liabilities increased by 9.20%, implying the company took on more debt compared to the previous year.

Noticeably, changes in assets are equal to changes in liabilities and shareholders’ equity, adhering to the central rule of the balance sheet:

\text{Assets} = \text{Liabilities} + \text{Shareholders' Equity}


Balance sheet rule, Assets = Liabilities + Shareholders' Equity

If this equality doesn’t hold in your sheet, there might be a calculation error.

Analysing Comparative Balance Sheet

Analysing a comparative balance sheet provides insightful data. Here are some key points:

Change in percentages: The main benefit is showing changes between years in percentage form. For instance, if a company had total assets valued at $20,000 in the previous year and $25,000 in the current year, then calculate:

Absolute changes: $25,000 – $20,000 = $5,000

Change in Percentages: ( $25,000 – $20,000 ) / $20,000 * 100 = 25%

This indicates a 25% increase in the company’s assets from the previous year, providing a more meaningful analysis than just stating a $5,000 increase.

Common Size Ratio: It compares items of the sheet with its entire category, providing insight into how specific items performed compared to the relevant category of the company.


\text{Common Size Ratio} = \left( \frac{\text{Single Item}}{\text{Entire Category}} \right) \times 100


For example, if cash is 20% of total assets, and the next year’s sheet shows 25%, it means cash has increased in comparison to total assets.

Working Capital: By analysing the comparative balance sheet, the current ratio can be found quickly for different time periods. The formula is current assets divided by current liabilities, measuring the company’s ability to pay its liabilities for the next year.


\text{Current Ratio} = \frac{\text{Current Assets}}{\text{Current Liabilities}}


For instance, if the company had a current ratio of 1.5 in the previous year and 1.7 in the current year, it indicates better management of short-term assets and liabilities.

In summary, every balance sheet ratio can be calculated and compared to analysis by putting figures into their respective formulas.

Advantages and limitations

Comparative balance sheets are utilised by different groups. Internal teams use this report to identify positive and negative elements of the company, enabling them to make improvements.

On the other hand, investors use it to understand the actual performance of the company and assess the possibilities of future growth, aiding them in making informed decisions on investing in stocks.

However, every coin has two sides, and comparative balance sheets have both advantages and limitations.


Changes in Account: One of the greatest advantages of a comparative financial statement is its ability to showcase changes in percentages. This provides quick insights into a company’s performance between time periods.

For Example, A percentage increase in assets is a positive sign, while an increase in liabilities compared to the previous year suggests that the company is taking on more debt from the market.

Fluctuation: Comparative balance sheets effectively identify strengths and weaknesses in every element. This insight helps determine which components are performing well and are suitable for further growth, as well as those that require attention.

For example, Seasonal fluctuations allow for the identification of overperforming aspects of the company. When comparing this period with the next accounting period in this report, it provides insights into how these elements will perform in the future.

Comparison with Peer Industry: Comparative balance sheets go beyond comparing a company’s statements with different accounting periods. They offer a wide range of comparisons, including assessing the same company’s different subsidiaries or comparing with other companies in the same industry (essentially, competitors).

For example, The use of percentage forms enables analysts to understand where their company stands in the market and attracts new investors.

Trend Analysis: Professionals can leverage comparative balance sheets to compare several years of financial data, revealing trends in company assets, liabilities, and loans. This provides a clear view of how each element performs over time.

For example, identifying specific components that decrease or increase year by year allows for strategic decision-making. For instance, if cash is consistently decreasing each year, it signals a need for the company to focus on cash flow management.

Forecasting: Comparative balance sheet data help in forecasting a company’s future performance. This information assists the management team in making decisions about targets, and it provides investors with insights for making informed investment decisions.

It’s essential to acknowledge that the comparative balance sheet has its limitations, which should be considered for a comprehensive analysis.


Policy and Method: Every company operates based on its own policies, which may not align with others. Comparing two different companies with different adopted policies does not give the correct view.

Even within the same company, different accounting methods adopted for different years can lead to unfair comparisons that are not addressed in the statement.

Market Conditions: Comparative financial statements, while containing large amounts of financial data, solely focus on the financial figures of the company. They neglect external factors like market conditions, impacting the company’s performance.

Inflation, a significant external factor, is not included in the balance sheet to assess the actual growth of the company. Additionally, external events like the COVID-19 pandemic or geopolitical conflicts can influence market conditions and affect company growth.

These issues are not highlighted in the comparative balance sheet, meaning market conditions differed between accounting periods.

Wrap up

The comparative balance sheet is superior to traditional balance sheets for analysing a company, we understood it through examples and analysis.

However, relying solely on a single statement is not a good idea. It is advisable to have knowledge of other financial statements.

Here, I suggest you read the following articles, which will undoubtedly increase your accounting knowledge significantly.

Cash Flow Statement: Definitive Guide

Budgeted Balance Sheet: What Is It and How to Create

All Balance Sheet Ratios: Formula and Example

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