IAFA 4034 - Financial Statement Analysis of HSC Trading Group Ltd

This assignment focuses on the financial statement analysis of HSC Trading Group Limited, including a periodic trial balance, profit and loss statement, and balance sheet. It covers the setup and recording of transactions in Sage 50, including creating a new company file, customer and vendor setup, inventory and payroll setup, and posting credit sales and purchase invoices. The analysis of financial statements includes an examination of account balances, sales, purchases, direct expenses, and overhead accounts, culminating in the calculation of net profit and the assessment of assets and liabilities. The conclusion highlights the company's working capital and dependence on outside funds, emphasizing the importance of financial statements for comparative analysis.

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Name of the Student:
Name of the University:
Author Note

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Table of Contents
Introduction:....................................................................................................................................2
Discussion:.......................................................................................................................................2
Set-Up and Recording Transaction in Sage 50:...........................................................................2
Creating New Company File in Sage 50:................................................................................2
Customer Set Up:.....................................................................................................................3
Vendor Set Up:........................................................................................................................3
Inventory Set Up:.....................................................................................................................3
Payroll Set Up:.........................................................................................................................4
Credit Sales Invoice Posting:...................................................................................................4
Credit Purchase Invoice Posting:.............................................................................................5
Analysis of Financial Statements:...............................................................................................6
Conclusion:......................................................................................................................................7
References list:.................................................................................................................................8

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Introduction:
The report is prepared for analyzing the financial statements of HSC Trading Group
Limited such as periodic trail balance, profit and loss statement and balance sheet. The periodic
trail balance is the statement that provides detail of account balances in the general ledger and
deals with the verification of total of debit and credit columns at the end of reporting period.
Profit and loss statement is the financial report providing summary of expenses, revenue and
losses attributable to company for any particular period. Balance sheet is the statement of
financial position that discloses liabilities and assets of company (Maaloul and Zéghal 2015).
Discussion:
Set-Up and Recording Transaction in Sage 50:
Creating New Company File in Sage 50:

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Customer Set Up:
Vendor Set Up:
Inventory Set Up:

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Payroll Set Up:
Credit Sales Invoice Posting:

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Credit Purchase Invoice Posting:

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Analysis of Financial Statements:
The details of account balances such as land, vehicle, property, payable, creditors,
administrative and staff salaries are provided in the trail balance. It can be seen that the total of
all debit balances are equal to total of credit balances. Here, the total debit balance for HSC
training group stood at $ 6018566.80 that is equivalent to $ 6018566.80. When the total of debit
balance is not equal to credit balance, then this depict an occurrence of error. Suppose, if the
account of staff salaries was mistakenly entered as $ 17000 instead of $ 18000. This would cause
difference between total of debit and credit amount.
Now, looking at the statement of profit and loss, it can be seen that there are three charts
of accounts comprising of sales, purchase, direct expenses and overhead account. HSC Trading
group has segregated the accounts of balances in the profit and loss statement as direct expenses,
sales and purchase account. Sales account includes export sales, product sales and sales of assets
that totaled to $ 527270. Purchase account includes purchase, stock and purchase charges and
this totaled to amount of $ 157764.30. Overhead account comprises of gross wages and heat,
light and power and the total amount of all such accounts stood at $ 66000. It can be seen that the
company is generating net profit of $ 303505.70 for the year ending 31st March, 2018. The main
account mentioned in the profit and loss statement is that of the sales, purchase and expenses
account that have been taken into consideration by HSC Trading group.
Balance sheet of an organization is divided into two parts that is assets and liabilities.
Assets accounts are further subdivided into current assets and fixed assets. Liabilities are
subdivided into two sections of short term liabilities and long term liabilities. Fixed assets of
HSC trading includes property, plant and equipment, motor vehicle and office equipment and
current assets on other hand include stock, bank account and debtors (James et al. 2015). It can

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be seen that value of fixed assets is more than that of current assets by amount $ 3069150.36.
Current liabilities on other hand comprise of VAT liability and short term creditor at the amount
of 71351.14 and 34348.80. The long term liabilities on other hand comprise of only long term
creditors and the amount stood at $ 900000. Reserves and capital account comprises of P and L
and reserves account. The amount of reserves stood at $ 397644.0 and the amount of profit and
loss stood at $ 303505.70 respectively. The data in the balance sheet is presented in the tabular
form where there is a column of current assets less current liabilities and total assets less current
liabilities. The difference between current assets and current liabilities represents the working
capital of amount $ 1213149.70 (Graham 2015). Therefore, balance sheet helps in presenting the
need of working capital of HSC trading group.
Conclusion:
From the analysis of the financial statements of HSC trading group, it can be seen that the
working capital of organization is positive and is large enough to cover the requirement of
working capital. The long term liabilities of company are higher than short term liabilities
indicating that the dependence of company on outside funds is comparatively higher. Analysis of
all the account balances of company has been done by forming the different financial statements.
Moreover, such financial statements also facilitate comparative analysis over a period of time.
The account of balances of customers and suppliers are constructed through forming separate
accounts and posting the ledger into different financial statements.

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References list:
Brigham, E.F., Ehrhardt, M.C., Nason, R.R. and Gessaroli, J., 2016. Financial Managment:
Theory And Practice, Canadian Edition. Nelson Education.
Bruce-Twum, E. and Mensah, C.C., 2015. Financial Statement Analysis.
Entwistle, G., 2015. Reflections on teaching financial statement analysis. Accounting
Education, 24(6), pp.555-558.
Graham, R.E., 2015. Financial Statement Analysis and Investment Management Services for
College Students.
Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.
James, W.M., Stephen, B.P. and Mark, B.T., 2014. Financial Reporting, Financial Statement
analysis, and Valuation-A Strategic Perspective, 8. Edition, Cengage Learning.
Maaloul, A. and Zéghal, D., 2015. Financial statement informativeness and intellectual capital
disclosure: An empirical analysis. Journal of Financial Reporting and Accounting, 13(1), pp.66-
90.
Pappa, A., 2015. Financial statement analysis of a multinational company and equity valuation of
computer-based technology group.

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