Chapter 17, Problem 2QC

To determine

Horizontal Analysis: The technique, used to analyze the trends in a financial statements item over the period is called horizontal analysis. It presents the change in a particular item for more than two or two time periods. It is a type of financial statement analysis and also used to estimate the future amount of financial statements items.

Balance Sheet: It is a part of financial statements that list company’s assets, liabilities and shareholders’ fund. It is prepared at the end of the accounting period and informs about company’s financial position on that day.

Income Statement: A part of financial statements that lists the income and expenses of the business for an accounting year is called income statement. It is prepared at the end of the accounting period to know the profitability of a business. All the expenses are listed on the debit side and the income or revenues are listed on the credit side. The difference between both sides is called net profit or net loss.

To Identify: The item that would be reported as per a horizontal analysis of L Company’s balance sheet.