Question

At the end of Year 1, the balance sheet for the Good Food Restaurant showed cash of $40,000. At the end of year 2, the balance sheet showed $10,000 in cash. A horizontal analysis of the balance sheets would show the relative difference between the 2 years as:________.

Answer 1

The answer is -$30,000.

A decrease of $30,000

Step-by-step explanation:

Horizontal analysis is a Financial statement analysis that compares historical financial information over a period of time(year to year). It is also known as trend analysis. It compares a company prior years and current year together. It helps to know the percentage increase or decrease between line items in financial statement.

In the question, year 1 balance sheet is $40,000

Year 2 is $10,000

Year 2 - year 1

$10,000 - $40,000

-$30,000

A decrease of $30,000

Percentage decrease $30,000/$40,000 x 100

75%