Vertical Analysis

Vertical analysis is the proportional analysis of a financial statement,

where each line item on a financial statement is listed as a percentage of

another item. Typically, this means that every line item on an income

statement is stated as a percentage of gross sales, while every line item on a

balance sheet is stated as a percentage of total assets.

The following illustration compares each account of Calasiao People’s

Memorial in Calasiao, Pangasinan’s Income Statement. Each item is

compared in gross receipts. This increase and decrease is based on the

annual receipts from year 2015, 2016, and 2017.

As shown in the table of Vertical Analysis of Calasiao People’s

Memorial, the percentage on each item is based on gross receipts. In the

year 2015, total expenses resulted to approximately 101.35% thus the net

income/loss percentage over gross receipts is approximately -1.33%. During

the year 2016, total expenses increased and summed up to 140.14%, gross

receipts for the year 2016 decreased, therefore net loss is increased to

approximately -40%, because the entity incurred greater expenses for the

year.

In the year 2017, total expenses increased to approximately 171.58%,

gross receipts for the year 2017 decreased, thus the net loss/income

percentage over gross receipts is approximately -71.54%. The net loss for
2017 increased because the entity incurred high amounts of expense in

addition to the decrease in gross receipts.

As for the expenses, a majority of the items only form a small to

moderate part of deductions to the net income before taxes.

Depreciation expense holds the largest expense item. It makes up

approximately 61.76%, 73.27% and 101.93% for the years 2015, 2016, and

2017 respectively of the deductions for the three-year period. Depreciation

expense consists of the depreciation of the construction equipment used

and the depreciation of land improvements.

Interest expense represents the interest paid on the borrowings made

by the entity. This represents the 2 nd largest expense item included in the

income statement. It makes up approximately 7.67%, 31.57% and 15.16%

for the years 2015, 2016, and 2017 respectively of the deductions of the

three-year period.

Salaries expense reports the salaries that employees earned during

the period. It forms less than 15% annually, specifically 11.28%, 13.52%

and 14.69% for the years 2015, 2016, and 2017 respectively, on total

deduction. This is because the cemetery had decreased its number of

employees from 7 regular employees to 3 regular and 2 on call.

 Repairs and maintenance expense consist of renovation and

maintenance expenses of the entity. It makes up approximately 2.72%,

5.61% and 10.56% for the years 2015, 2016, and 2017 respectively of the

deductions for the three-year period.

The taxes and licenses line item is composed of the business permits

and legal documents needed by the entity in its operation. This represents

4.54%, 3% and 5.91% for the years 2015, 2016, and 2017 respectively of

the deductions for the three-year period.

Representation expense consists of the charges incurred in representing

the company before suppliers. For the year 2015 it is approximately 0.63% and

1.58% for the 2017; no representation expense is incurred in 2016.

The SSS, Philhealth, PAG-IBIG expense item is the expense paid by

the entity for its employees. It makes up approximately 1.52%, 4.17% and

3.29% for the years 2015, 2016, and 2017 respectively of the deductions for

the three-year period.

Light and water expense forms less than 5% annually, specifically

4.15%, 0.94% and 3.20% for the years 2015, 2016, and 2017 respectively of

the deductions for the three-year period.

Rent expense is the fixed expense incurred by the company. It is

approximately 1.50% for 2015, 1.59% for 2016, and 2.94% for 2017.
 Professional fees make up approximately 1.57%, 1.19% and 2.2% for

the years 2015, 2016, and 2017 respectively, on total deductions.

Gas and oil makes up approximately 1.94%, 0,96%, 1.15% for the

years 2015, 2016, and 2017 respectively on total deductions.

Miscellaneous expense is approximately 1.84% in 2017, 4.30% in

2016, and 0.56% in 2015. These are the different expenses that is needed

by the entity.

Travel expense is the 3rd smallest expense incurred by the entity. It

forms less than 2% annually, specifically 0.63%, 0.88%, and 1.72% for the

years 2015, 2016, and 2017 respectively on total deductions.

The communication expense item is composed of telephone and

internet fees incurred. It forms less than 2% annually, specifically 1.47% for

2017, 0.96% for 2016, and 0.78% for 2015 respectively.

Supplies expense is composed of the office supplies used by the

entity. It is approximately 1.15% in 2017, 0.52% in 2016, and 0.89% in

2015.