Relevant to Papers MA1, MA2 and F2/FMA
Accounting data is often presented in the form of tables of numbers, sometimes simply as a print out from a spreadsheet or reports from an accounting software package. While this style of presentation provides detailed figures, it may not always be the most effective way to present and communicate information. It may be that some key information should be highlighted, perhaps relationships between certain figures should be emphasised, or trends identified. Appropriate presentation of data in the form of graphs or charts can be a useful analysis tool and if the data is then effectively interpreted this can facilitate the decision-making process. The syllabus for Papers MA2 and F2/FMA require that candidates should be able to describe the key features of different charts, identify suitable charts in particular situations and interpret data presented in charts. The material in this article is also relevant for candidates sitting Paper MA1.
There are many software packages that allow the user to create charts that look very professional but it is important to consider the different types of charts available and select an appropriate chart type for the data being presented. Presenting data in an inappropriate chart can convey information which may be misleading. The term ‘chart’ is generally considered to include all types of graphs and any other type of chart used to give a pictorial presentation of the data. Some types of charts tend to be described as graphs while others use the term chart, eg it is more common to hear the term line graph but the term bar chart. The words ‘chart’ and ‘graph’ are considered to be interchangeable for the purposes of this article.
A variety of chart types will be reviewed in this article, and the features that make a particular chart type appropriate for the type of data being presented will be highlighted. Some useful tips on presentation will also be provided, together with guidance on interpreting the data presented in the charts. To illustrate the point of ensuring that an appropriate chart type is selected, some data has been presented using an inappropriate chart type resulting in ineffective communication of information.
Column, bar and line charts for a single data set (Charts 1-5)
In each of the Charts 1-5, a single series of data is represented on the graph. Often the data being presented in this type of chart spans a number of time periods such as years, quarters or months but these types of charts can also be used to represent data from one time period but, for example, from different regions or perhaps for different output levels. These charts are drawn with two axes, with the independent variable being shown on the x-axis and the dependent variable shown on the y-axis.
Charts 1 and 2 are examples of simple column charts. The columns represent the value of the data vertically and each column will be of a uniform width. Note that the heights of the columns vary to reflect the data values but the width of each column on a specific graph will be the same. Although the two charts are the same basic chart type, there are some minor differences in style that are worth pointing out. Chart 1 shows data for total sales over a five-year period with the years being shown on the x-axis and the $ amounts on the y-axis. A key or legend is displayed emphasising that the data relates to Total Sales and while a legend is often included automatically by the charting software it is not necessary when there is only one data series as long as the chart has an appropriate title. Chart 2 is also a simple column chart but the data relates to one year only and each column represents a division of the business so the x-axis is not years but the divisions, North, South, East and West. Notice also that the style of the chart has slightly changed as it is presented in a 3D format, the legend has been removed and the y-axis scale is in round thousands with the axis label having been changed appropriately.