Statistics Basics – Theory Notes – CA.
Pranav
A. INTRODUCTION TO STATS
Definition
Singular Sense:
Scientific method that is used for collecting, analyzing and presenting data
Used to draw statistical inferences
Inferences means conclusion reached on the basis of evidence and reasoning
Example:
After applying statistical methods we have arrived at a conclusion that in last 5 years crime rate is
reduced.
Plural Sense:
Data qualitative or quantitative collected to do statistical analysis
Example: Based on Cricket Match statistic of this stadium, chasing team wins mostly
History of Stats
Word Origin
Latin word – Status
Italian word – Statista
German word – statistic
French word – statistique
Publication:
Koutilya’s book Arthashastra
Stat records on Agriculture found in Ain-i-Akbari (author Abu Fezal)
Census: First ever census done in Egypt (300 years BC to 2000 BC)
Application of Stats
There are various but we will confine to below:
1. Economics: Time Series analysis, index, demand analysis, econometrics, regression analysis
2. Business Management: business decisions rely upon QT
3. Commerce/ Industry: Sales, Purchase, RM, Salary Wages etc. data are analyze for business
decisions and policy making
Limitation of Stats:
1. Relevant for aggregate data and not individual data
2. Quantitative data can only be used, however for qualitative – it needs to be converted into
quantitative
3. Projections are based on conditions/ assumptions and any change in that will change the
projection
4. Sampling based conclusions are used, improper sampling leads to improper results
Statistics Basics – Theory Notes – CA. Pranav
B. COLLECTION OF DATA
Data and Variable
Variable = measurable quantity
Discrete variable: when a variable assumes a finite or count ably infinite isolated values.
Example: no. of petals in a flower, no. of road accident in locality
Continuous variable: when a variable assumes any value from the given interval (can
also be in decimals, fractions). Example: height, weight, sale, profit
Attribute: qualitative characteristics. Example: Gender of a baby, nationality of a person
Data = quantitative information shown as number. These are of two types:
Primary : first time collected by agency/ investigator
Secondary: collected data used by different person/ agency
How to collect Primary Data?
1. Interview Method:
a. Personal Interview: directly from respondents. Example: Natural Calamity, Door to
Door Survey
b. Indirect Interview: when reaching to person difficult, contact associated persons.
Example: Rail accident
c. Telephone Interview: over phone, quick and non-responsive
Type of Interview/
Personal Indirect Telephone
Parameters
Accuracy High Low Low
Coverage Low Low High
Non Response Low Low High
2. Mailed Questionnaire Method:
a. Mailed means by Post or Email
b. Well drafted + properly sequenced + with guidelines
c. Non Response is Maximum
3. Observation Method:
a. Data collected by direct observation or using instrument
b. Example: Height check, Weight check,
c. Although more accurate but it is time consuming, low coverage and laborious
4. Questionnaire filled and sent by Enumerators
a. Enumerator: Person who directly interact with respondent and fill the questionnaire
b. Generally used in Surveys
Statistics Basics – Theory Notes – CA. Pranav
Sources of Secondary Data
1. International sources like World Health Organization (WHO), International Monetary Fund
(IMF), International Labor Organization (ILO), World Bank
2. Government Sources – In India – Central Statistics Office (CSO), National Sample Survey
Office- NSSO, Regulators – RBI, SEBI, RERA, IRDA
3. Private or Quasi-government sources like Indian Statistical Institute (ISI), Indian Council of
Agriculture, NCERT
4. Research Papers and other unpublished sources
Scrutiny of Data
1. Scrutiny – checking accuracy and consistency of data
2. Finding of errors by enumerators while filling or receiving questionnaire
3. Internal consistency check: when two or more series of related data are given check each
other
4. Consider enumerators’ bias while using data
C. PRESENTATION OF DATA
Classification and organization of Data:
means process of arranging data based on some logic
there are four types of classification of data
a. Chronological/ Temporal/ Time Series Data (ex. Profit YoYi.e year on year)
b. Geographical or Spatial Series Data (ex. Weather in North India and South India)
c. Qualitative or Ordinal Data (ex. Rating Top 20 songs by Radio Mirchi)
d. Quantitative or Cardinal Data (no. of left handed batsmen in cricket teams playing
CWC19)
Mode of Presentation
1. Textual: where text is used in the form of para or sentence. Example: Height of A,B and C is
160cm, 165cm, 175cm respectively
2. Tabular/ Tabulation:
Data shown in the form of table
Some important terms about Table (we will understand by example - next page figure)
It is preferred over textual form because
Useful in easy comparison
Complicated data can be presented
Table is must to create a diagram
No analysis possible without diagram
Statistics Basics – Theory Notes – CA. Pranav
3. Diagrammatic representation of data
Can be helpful for layman (without having much knowledge of numbers)
Hidden trend can be traced
Table is more accurate than diagrams
Types of Diagram below:
Line Diagram/ Histogram:
plotting points in graph and join them to make a line
used generally for time series (variable y is plotted against time t)
for wide fluctuation, log chart or ratio chart is used (log y is plotted against t)
for two or more series of same unit – multiple line chart is used
for two or more series of distinct unit – multiple axes chart is used
Refer Material for Diagram
Bar Diagram
Bar means rectangle of same width and of varying length drawn horizontally or vertically
For comparable series – multiple or grouped
rouped bar diagrams can be used
For data divided into multiple components – subdivided or component bar diagrams
For relative comparison to whole, percentage bar diagrams or divided bar diagrams
Pie Chart
Used for circular presentation of relative data (% of whole)
Summation of values of all components/segments are equated to 360 Degree (total
angle of circle)
°
Segment angle =
Statistics Basics – Theory Notes – CA. Pranav
D. FREQUENCY DISTRIBUTION
What is Frequency Distribution?
Frequency means number of times a particular observation is repeated. This applies to both variable and
attribute. It is shown in tabular form with class interval or the observation in one column and its
frequency in the other.
These are of two types
Ungrouped/ Simple Frequency Distribution
Grouped Frequency Distribution
How to construct a frequency distribution
1. Find Range = Largest observation – Smallest Observation
2. Form no. of classes
i. In case of discrete variable – number of isolated values
ii. In case of continuous variable - no. of class interval =
iii. Present classes or class interval in a table known as frequency distribution table
iv. Apply tally mark/ stroke against occurrence of particular value in a class / class
interval
v. Count strokes to obtain frequency of each class or class interval
Important Terms
1. Mutually exclusive classification or Overlapping Classification: This is usually applicable for
continuous variable. An observation as UCL is excluded from the class interval and taken in the
class where it is LCL.
Example: in the below class interval where will the observation 20 fall?
Class Class where 20
will fall
10-20 No – excluded
20-30 Yes
30-40 No
2. Mutually inclusive classification or Non Overlapping Classification: This is usually applicable to
discrete variable. All observation including UCL and LCL will be taken in the same class interval
as there is no confusion.
Example:
Class Class where 20
will fall
10-19 No
20-29 Yes
30-39 No
Statistics Basics – Theory Notes – CA. Pranav
3. Class Limit: for a class interval CL is the minimum and maximum value the class interval may
contain. Minimum = Lower Class Interval (LCL) and Maximum = Upper Class Interval (UCL)
Example:
Class Type LCL UCL Class Type LCL UCL
Mutually Mutually
10-19 10 19 10-20 10 20
Exclusive Inclusive
Mutually Mutually
20-29 20 29 20-30 20 30
Exclusive Inclusive
Mutually Mutually
30-39 30 39 30-40 30 40
Exclusive Inclusive
4. Class Boundary: These are actual class limits of a class interval
a. For Mutually Exclusive / Overlapping : Class Boundary = Class Limit
LCL = LCB, UCL = UCB
b. For Mutually Inclusive / Non Overlapping: Mid of the two class limits
LCB = LCL – D/2, UCB = UCL + D/2
Example:
Class Type LCL UCL LCB UCB Class Type LCL UCL LCB UCB
Mutually Mutually
10-19 10 19 9.5 19.5 10-20 10 20 10 20
Exclusive Inclusive
Mutually Mutually
20-29 20 29 19.5 29.5 20-30 20 30 20 30
Exclusive Inclusive
Mutually Mutually
30-39 30 39 29.5 39.5 30-40 30 40 30 40
Exclusive Inclusive
5. Mid Point/ Mid Value of Class / Class Mark
𝐋𝐂𝐋 𝐔𝐂𝐋 𝐋𝐂𝐁 𝐔𝐂𝐁
or
𝟐 𝟐
6. Width / Size of Class Interval
UCB – LCB
7. Cumulative Frequency
Class Frequency Less than type CF More than type CF
10-20 5 5 18
20-30 2 7 13
30-40 8 15 11
40-50 3 18 3
Total 18
Statistics Basics – Theory Notes – CA. Pranav
8. Frequency Density
𝐅𝐫𝐞𝐪𝐮𝐞𝐧𝐜𝐲 𝐨𝐟 𝐜𝐥𝐚𝐬𝐬
𝐂𝐥𝐚𝐬𝐬 𝐥𝐞𝐧𝐠𝐭𝐡 𝐨𝐟 𝐭𝐡𝐚𝐭 𝐜𝐥𝐚𝐬𝐬
9. Relative Frequency or % Frequency
𝐅𝐫𝐞𝐪𝐮𝐞𝐧𝐜𝐲 𝐨𝐟 𝐜𝐥𝐚𝐬𝐬
𝐓𝐨𝐭𝐚𝐥 𝐅𝐫𝐞𝐪𝐮𝐞𝐧𝐜𝐲 𝐨𝐟 𝐭𝐚𝐛𝐥𝐞
Class Frequency Relative Percent
Class Frequency
Length Density Frequency Frequency
10-20 5 10 0.5 5/18 27.7%
20-30 2 10 0.2 2/18 11.11%
30-40 8 10 0.8 8/18 44.44%
40-50 3 10 0.3 3/18 16.67%
Total 18
Graphical Presentation of Frequency Distribution
1. Histogram/ Area Diagram [refer study material page 14.20 for diagram]
a. It is a convenient way to represent FD
b. Comparison between frequency of two different classes possible
c. It is useful to calculate mode also
d. Steps to create
Covert CL into CB and plot in x axis
Form rectangles taking class interval as base (x axis)
And frequency as length (y axis) | Use frequency density in case of uneven
length
2. Frequency Polygon
a. Usually preferable for ungrouped frequency distribution
b. Can be used for grouped also but only if class lengths are even
c. Steps to create
Plot (xi, fi) where xi = class value (in case of ungrouped), mid value (in case of
grouped) and fi = frequency
Join all plotted points to make line segments which eventually will become a
polygon (a shape with multiple number of line segments)
3. Ogives/ Cumulative Frequency Graph
a. Create a table where cumulative frequency is mapped against each CB (Class Boundary)
and make a curve by plotting and joining points by line segments. (curve is called Ogive)
b. This graph can be made by both type of Cumulative Frequency and called as Less than
Ogive or More than Ogive
Statistics Basics – Theory Notes – CA. Pranav
c. It can be used for calculating quartiles also
d. If we plot both ogives in same graph, perpendicular line drawn from their intersection
towards x axis is cutting axis at Median
4. Frequency Curve
a. It is a limiting form of Area Diagram (Histogram) or frequency polygon
b. It is obtained by drawing smooth and free hand curve though the mid points
c. These are of below four types:
Bell Shaped
U-Shaped
J-Shaped
Combination of Curves as Mixed Curve
