Corresponding Amount

Corresponding amount refers to an amount in the published financial accounts of a limited company that relates to the previous financial year to provide a basis for comparison.
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Definition of Corresponding Amount

Corresponding amount, also known as comparative amount, refers to figures in the financial accounts of a company from the previous financial year. These figures are essential for comparison with the current year’s data to help stakeholders assess the company’s performance over time. Corresponding amounts are mandated by regulatory frameworks like the Companies Act to ensure financial transparency and consistency. When significant changes in accounting policies occur, such corresponding amounts need to be restated with detailed notes explaining the adjustments.

Examples of Corresponding Amounts

  1. Revenue Comparison:

    • Current Year: $2,000,000
    • Corresponding Amount (Previous Year): $1,800,000

  2. Net Profit Comparison:

    • Current Year: $250,000
    • Corresponding Amount (Previous Year): $220,000

  3. Total Assets Comparison:

    • Current Year: $5,500,000
    • Corresponding Amount (Previous Year): $5,000,000

Frequently Asked Questions (FAQs)

What is the purpose of showing corresponding amounts?

The primary purpose is to provide a basis for comparison, helping stakeholders to analyze performance trends, growth, and other financial changes across different periods.

Are corresponding amounts required by law?

Yes, corresponding amounts are typically required by laws such as the Companies Act, which mandates their inclusion for financial transparency and accuracy.

What happens if there is a change in accounting policy?

If there is a change in accounting policy, corresponding amounts from the previous year must be restated. Detailed notes should be provided to disclose the nature and reason for the adjustments.

How should non-comparable corresponding amounts be handled?

Non-comparable corresponding amounts due to changes in accounting policies should be restated, and adjustments should be fully disclosed in the financial notes.

Can there be instances where corresponding amounts are not required?

In some rare instances, if a company does not have previous year financial data (e.g., a newly formed company), corresponding amounts might not be available or required.

  • Comparative Financial Statements: Financial statements showing figures from multiple periods side-by-side for comparison.
  • Restatement: Revising previous financial statements to align with new information or accounting policies.
  • Financial Year: A year as reckoned for accounting and financial reporting purposes.
  • Companies Act: Legislation in various countries that governs company incorporation, structure, and financial reporting requirements.

Online References

  1. IAS Plus - Comparative Information
  2. EY - Accounting Policy Changes
  3. HM Treasury - Financial Reporting Manual

Suggested Books for Further Studies

  1. “Financial Accounting Theory” by William R. Scott
  2. “Intermediate Accounting” by Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield
  3. “International Financial Reporting Standards (IFRS) 2019 A Practical Guide” by Hennie Van Greuning
  4. “Accounting Principles” by Jerry J. Weygandt, Paul D. Kimmel, and Donald E. Kieso

Accounting Basics: “Corresponding Amount” Fundamentals Quiz

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