DIRE DAWA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

ACCOUNTING PRACTICE IN GOVERNMENT INSTITUTION

(IN CASE OF DIRE DAWA ADMINISTRATION WATER

SUPPLY AND SEWERAGE AUTHORITY)

A research Paper submitted to Department of Accounting and Finance partial

fulfillment of the Requirement for Bachelor Art (BA) Degree in Accounting
and Finance

By: Abraham Beyene ID. E/013/11

Advisor: Abdurahman A. (Msc)

OCT, 2022
Dire Dawa,
Ethiopia
ABSTRACT

This study would aim to asses accounting practice in the case of Dire-Dawa Administration
Water Supply and sewerage Authority. The main objective of the study is to assess accounting
practice of the organization. To achieve this objective, both primary and secondary data sources
were used. Primary data would be obtained by using self-administered questionnaires. Whereas
secondary data would be obtained from different manual, financial reports, company records The
researcher used purposive sampling of non-probability technique in order to select staff of the
organization that is directly responsible for the practice of accounting in of the organization. The
researcher was used descriptive method of data analysis. The collected data was analyzed,
processed and interpreted by using tables and percentages. Finally as a conclusion Dire-Dawa
Administration Water Supply sewerage Authority employees or members have a clear
understanding of accounting practice financial reports covering all funds and financial
transactions.
TABLE OF CONTENTS

TOPIC PAGE

ACKNOWLEDGEMENT………………………………………………… ............I

ABSTRACT………………………………………………………………………...II

TABLE OF CONTENTS…………………………………………………………..III

LIST OF TABLES………………………………………………………………....VI

ACRONYM………………………………………………………………………..VII

CHAPTER ONE…………………………………………………………………..1

1. Introduction……………………………………………………………………..1

1.1. Background of the study……………………………………………………….1

1.2. Statement of the problem……………………………….……………………... 2

1.3. Research question……………………………….……………………………...3

1.4. Objectives of the study…………………………………………………………3

1.4.1. General objective …………………………………………………………..3

1.4.2. Specific objectives …………………………………………………………3

1.5. Significance of the study……………………………………………………….4

1.6. Scope of the study……………………………………………………………...4

1.7. Limitation of the study…………………………………………………………4

1.8. Organization of the paper…………………………………............................... 4

CHAPTER TWO……………………………………………………………......... 5

2. Review of literature …………………………………………………………….5

2.1 Definition of Accounting Practice…………………………………………….. 5

2.2 Financial Reporting For Government………………………………………….. 7

2.3 Comprehensive Annual Financial Report………………………………………7

2.3.1 Basic Principles of Governmental Accounting

and Financial Reporting…………………………………………................9

2.4 Accounting Reporting Capabilities…………………………………………...9

2.5 Overview of federal government of Ethiopia accounting system……………....9

2.6 Types of Accounting Practices ………………………………………………...11

2.6.1 Purchasing system …………………………………………………………11

2.6.2 Payroll system. ……………………………………………………………..12

2.7 General ledger Accounting system and reporting in government
Organizations…………………………………………………………………….13
2.8 Accounting system and reporting in government organizations………………...14
2.8.1 Basic accounting concepts…………………………………………………..14

2.8.2 Book keeping method……………………………………………………….15

2.8.3 FGE Accounting System……………………………………........................15

2.9 Limitations of accounting procedures Practices……………………………….15

2.10 empirical evidence……………………………………………………………..16

CHAPTER THREE………………………………………………………………. 19

3. Research methodology…………………………………………………………...19

3.1 Research design ………………………………………………………………...19

3.2 Source of data and data collection techniques …………………………………19

3.2.1 Source of data……………………………………………………………….19

 3.2.2 Method of data collection …………………………………………………..20

3.3 Target population and method of sampling …………………………….............20

3.4 Method of data analysis and presentation ……………………………………....20
ACRONYM

AICPA----AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANT

FASB------FINANCIAL ACCOUNTING STANDARD BOARD

FGE--------FEDERAL GOVERNMENT OF ETHIOPIA

GAAP-----GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

GASB-----GENERAL AUDIT STANDARD BOARD

GASP------GOVERNMENTAL ACCOUNTING STANDARD PRINCIPLE

GRN-------GOODS RECEIVED NOTE

IBEX-------INTEGRATED BUDGET EXPENDITURE

MOFED—MINISTRY OF FINANCE AND ECONOMIC DEVELOPMENT

CAFR----- COMPREHENSIVE ANNUAL FINANCIAL REPORT

 CHAPTER ONE

1. INTRODUCTION

1.1 Background of the study

Accounting is the process of analyzing, recording, summarizing, evaluating and interpreting

organizations financial activities and stated, and communicating the result to the users. Financial
activities of a business entity are gathered and recorded for the purpose of financial reporting. A
firm's accounting practice refers to the method by which its accounting policies are implemented
and adhered to on a routine basis, typically by an accountant and/or auditor or a team of
accounting professionals. An accounting practice is intended to enforce a firm's accounting
guidelines and policies. It exists as the daily recording of financial data that is important to the
evaluation and monitoring of the firm's economic activities. Accounting practice refers to the
normal, practical application of accounting and/or auditing policies that occurs within a business
(Nor, 2002).

Accounting frameworks such as International Financial Reporting Standards allow the preparers
of financial statements to use accounting policies that most appropriately reflect the
circumstances of their entities. Whereas a degree of flexibility is important in order to present
reliable information of a particular entity, the use of diverse set of accounting policies amongst
different entities impairs the level of comparability between financial statements. The use of
different accounting frameworks by entities operating in different geographic areas also presents
similar problems when comparing their financial statements. The problem is being overcome by
the growing use of IFRS and the convergence process between leading accounting bodies to
arrive at a single set of global standards (strom, 2005).

Accounting requires the use of estimates in the preparation of financial statements where precise
amounts cannot be established. Estimates are inherently subjective and therefore lack precision
as they involve the use of management's foresight in determining values included in the financial
statements. Where estimates are not based on objective and verifiable information, they can
reduce the reliability of accounting information. The use of professional judgment by the
preparers of financial statements is important in applying accounting policies in a manner that is
consistent with the economic reality of an entity's transactions (Arsen, 2001).
The significance of financial reporting standards in an audit of historical financial information,

the significance of financial reporting standards cannot be over-emphasized. The opinion

ultimately provided at the end of the engagement will state whether, in the auditor’s opinion, the
financial statements are fairly presented (or show a true and fair view). A fundamental issue that
must be considered in order to reach this opinion is whether the financial statements have been
prepared in compliance with the relevant financial reporting framework. Clearly, the auditor
must fully understand the relevant financial reporting standards to be able to reach an opinion as
to whether they have been complied with (Ibd, n.d).

Key prerequisite for meaningful financial statements is that they be comparable to those for other
companies, especially firms within the same industry. To meet that requirement, statements are
prepared in accordance with Governmental Accounting Standard Board which encompasses the
conventions, rules and procedures, necessary to define accepted accounting practice at a
particular time. Over time, standards are eliminated and amended as business conditions change
and new research performed (Nor Walk, 2009).

The practice of formal accounting in Ethiopia dates back to 1905, when the first bank of
Abyssinia was opened in collaboration with Egypt. However, the 1960 commercial code of the
Imperial government lied down a legal ground for the current accounting practice in the country.
The 1960 commercial code of Ethiopia (Art 63- 73) states that any person or business
organization carrying on trade shall keep books and accounts as are required in accordance with
the business practices and regulations, having regard to the nature and importance of the trade
carried on. Further, the Ethiopian Income tax proclamation No.979/2008 specifies that business
organizations that earn annual turnover of more than Br. 500,000(approximately $20,000) are
required to keep books of accounts.( Zerihun Ayenew,2007)

1.2 . Statement of the problem

Public sector accounting concept is closely related to regional autonomy and fiscal
decentralization that is currently running. Relation to reform the public sector, local autonomy to
be one part of the reform of the public sector itself. Autonomy provides flexibility (discretion) in
the area to develop local financial management systems are widely (Mardiasmo, 2002).
Accounting for the public sector has a major role to prepare the financial statements as a form of
implementation of public accountability.This is confirmed by Mardiasmo (2002) which state that
good governance and public sector accounting has a strong relationship, in which the public

sector accounting as a tool to do a good elaboration governance to order more real. Several other
studies indicate that the particular accounting accounting public sector has a very important role
in the creation of good governance, Kelkar (2009); Shil (2008); Santoso and Pambelum (2008).

Public sector accounting is closely linked with the implementation and accounting treatment in
the public domain (Mardiasmo, 2009). American Accounting Association (1970) in Glynn
(1993) states that the purpose of accounting in public sector organizations is to provide the
necessary information in order to manage the operations and allocation of resources entrusted to
the organization appropriately, efficiently, and economically, as well as providing information
for the report accountability of the management implementation and report the results of
operations and the use of public funds.

Currently, the government of Ethiopia have taken different measures to develop efficiency in
accounting practices including switching to computerized Software as a result has increased the
efficiency and improvement compared to those years when accounting was manual
(Mwaura,2013).He further established that Information technology has considerable positive
effects on accounting productivity in that it is important to put computerized accounting in use
for the purposes of improving the financial reporting and the general performance of the
organization. Accounting critically reduces improper allocation and misuse of funds by the
workers especially in the public sector (Mgenda, 2017). Therefore for government ministries to
perform well, accounting should be given clear attention.

Accounting frameworks such as International Financial Reporting Standards allow the preparers
of financial statements to use accounting policies that most appropriately reflect the
circumstances of their entities. Whereas a degree of flexibility is important in order to present
reliable information of a particular entity, the use of diverse set of accounting policies amongst
different entities impairs the level of comparability between financial statements (Larson ,
2000).The use of different accounting frameworks by entities operating in different geographic
areas also presents similar problems when comparing their financial statements.
The problem is being overcome by the growing use of International Financial Reporting
Standards and the convergence process between leading accounting bodies to arrive at a single
set of global standards (Freeman, 1998). It is expected that Dire Dawa water Supply and

sewerage authority have a formal way of record keeping and fair presentation of financial affairs
based on the accounting theory practices set form for not profit governmental organizations.
Most organizations face different problems in implementing and applying the theories and
practices of appropriate accounting and financial reporting systems, some of them could be:-The
variation between budgeted and actual and their consequence in the accounting and reporting
practice; Inconsistency in implementing and applying the principles set by Financial Accounting
Standard Board in relation to not for profit governmental organizations.

Osuala (1993), many enterprises record their transactions randomly without adherence to any
established systems of accounting; hence making it difficult in keeping track of the cash flows in
the enterprises.

Mitchel et al. (2000) argued that accounting information could help SMEs manage short-term
problems in such areas as costing, expenditure and cash flow by providing information to
support monitoring and control. Knowledge of cash-flows according to Pandy (1991) is very
important because cash-flows are inseparable parts of the business operations of firms. Peren and
Grant (2000) noted that decision making processes in small scale enterprises are more
sophisticated than anticipated but they lacked effective accounting information and control
system to support their decisions.

Previous studies has been investigated their study on this area almost all of them conducted on
identified the accounting practice in small and medium business organization in different
countries and different time. However, empirical evidence had limitation of methodology
therefore this paper will be try to fill this methodology gap and gives investigations of the
binding constraints of Accounting practice in Dire dawa administration water supply and
sewerage authority

By require to be investigating considering the current data on the subject having these possible
problems in our mind, the study will attempt to answer the following basic research questions:-
1.3. Research question

1. Does the organization use an accounting manual?

2. Is the organization using acceptable evaluation method to record deprecation of plant
asset?
3. What basis of accounting is used to recorded gift /donation?
4. What are the problems of accounting and reporting practice of the organization?

1.4. Objectives of the study

1.4.1. General objective

The general objective of the study is to assess the accounting practice of Dire Dawa city Water
supply and Sewerage Authority.

1.4.2. Specific objectives

1. To evaluate whether the organization has accounting manual or not.

2. To examine how depreciation for plant assets were evaluated.
3. To assess the basis of account used to record for gift /donation.
4. To assess the problems of accounting and reporting practice of the organization.

1.5. Significance of the study

The study benefit to the management of Dire Dawa city water supply and Sewerage Authority,
other local not for profit governmental entities and for any other researcher in identifying the
proper usage of accounting systems in accordance with accounting principles and standard of
FASB, and the researcher has got practical application before joining to the practical world and
finally this study would benefit to the researchers who are interested to conduct their study on the
same area as a source.
1.6. Scope of the study

The study is conducted on the accounting and reporting practice of Dire Dawa City Water
Supply and Sewerage Authority in general. Specifically it focused the evaluation of accounting
practice, record keeping, reporting mechanism and internal control system at Dire Dawa Water
Sewerage Authority from 2016-2021.G.C

1.7. Limitation of the study

There may be so many limitations to complete the proposal some of them are: - In sufficient
information and research related documents, Insufficiency of more relevant reference books,
time limitation In addition, finance constraints are other expected constraints which might affect
the output of the study.

1.8. Organization of the paper

The research paper has five chapters. The first chapter consists of background of the study,
research problem, research question, objective, significance, scope and limitation of the study
and, Chapter two deals with all related literature review. The third chapter presents research
methodology; the forth chapter contain data presentation and analysis. The last chapter, chapter
five contains summary of finding, conclusion and recommendation of the study.
 CHAPTER TWO

REVIEW OF LITERATURE

2.1 Definition of Accounting Practice

Pandey (1983) accounting practice is the financial score of an enterprise. They contain which
is needed by both investor and management. Financial information is required to predict,
compare and evaluate the firms’ profitability. It is also required to aid in economic decision
making, investment and financial decision making. It point out the problem faced by an
organization. It also brings to notice of the firm opportunity that are likely to arise. It indicates
possible action when needed.

However Shirin (2001) writes that accounting practice lack standardization. Standardization
of accounting practice would foster the internationalization of the accounting profession
accountancy firm to operate with in different countries. It would add mobility of staff.

Conradiya (2001) governmental accounting is an umbrella term refers to various accounting

system used by various public sector entities. In United States for instance, there are two level
of government which follow different accounting standard set forth by independent, private
sector board at federal level, Federal Accounting Standard Advisory Board (FASAB) sets
forth accounting standard to follow. Similarly, there is Governmental Accounting Standard
Board (GASB) for state and local level government.

Governmental accounting refers to field of accounting that specifically finds application in

public sector or government. Special field of accounting exist because

 The objective to which accounting to differ significantly from that for which generally
accepted accounting has been develop for private sector (business) and usage of their
result of accounting process of government differ significantly from the use thereof in
private sector
 An exception exist on the above mentioned difference in the case of public utility (for
example electric service) that may be intended to produce a net income or profit, but a
significant debate exists over whether there should be such an exception nationalization
includes among others , the argument that entities should be either private or public and
 the objective of public entities should differ significantly from that of private sector in
other word is generation and reticulation with objective of not generating profit

Horngranel (1973) states that accounting practice are the major quantitative information
system in almost every organization. They should provide information for the broad purpose,
internal reporting to manager for use in making routine decisions. Formulating major plan and
polices and external reporting to stick holder, government and other outside party for use in
investment decision, income tax collection and variety of other application.

Many organizations develop practices primarily to satisfy legal requirement imposed by

external party. These practices often neglect the need of national users.

While Glautier and under down (1997), state that accounting practices have been used for
thousands of years. As business grew, accounting practices were invented by people to keep
track of costs and profitability. Modern accounting measures communicate financial
information about an entity. This information is used to plan, control, evaluate and make
decisions about a business. The process begins with book-keeping, with record transactions
such as checks and invoices, and summarizes these transactions in financial statements.

The form of accounting information reputed to decision makers depends on accounting

practices adopted. These practices are imposed by accounting policy makers who, having
knowledge of accounting theories, have the responsibility of responding to the needs of users
of accounting information. However, it is evident that deficiencies in accounting theory,
policy making, accounting practice and the use of accounting information, impair the
usefulness of an accounting information service (Glautierand U, 1997).
Financial managers use the financial statements to raise and spend cash and make intelligent
financial decisions. Accounting Theory may be defined as logical reasoning in the form of a
set of broad principles that; provide a general framework of reference by which accounting
practice can be evaluated, and guide the development of new accounting practices and
procedures.

2.2 Financial Reporting For Government

Shirin (2001) financial reporting play major role in fulfilling government duty to be publicly
accounted in democratic society. Public accountability is based on the belief the tax payer has
right to know, a right to receive openly declared facts that may lead to public debate the
citizen and their elected representative, use of financial reporting by citizens and legislative
and oversight officials is pervasive.

Financial reports of state and local government according to the government standard board,
are used primarily to

 Compare actual financial results with legally adopted budget.

 Assist in determining compliance with financial related law, rules and regulations.
 Assist financial condition and result of operation.
 Assists and e valuated efficiency and effectiveness.

A government accounting system must make it possible both to present fairly and with full
disclose the financial position and result of financial operation on fund and account group of
government unit in conformity with GAAP and to determine and demonstrate compliance
with finance related legal and contractual provisions (Glauter,1997).

Adherence to GAAP is essential to ensure a reasonable degree of comparability among the

general purpose financial reports of states local government. American institute of certified
public accountant (AICPA) recognize the GASP as designed body to establish accounting
principle for state and local government under the AICPA (Jhony B, 1993).

In some states , however, law require the state government and local government within the
state to follow practice such as cash base accounting, not consistent with GAAP. In those
cases financial stamens and reports prepared in compliance with state law are considered
special reports or supplement schedule (Kamal, 1997).

2.3 Comprehensive Annual Financial Report

Introductory materials includes such obvious, but sometimes forgotten items as a title page,
content page, letter of transmittal and other materials deemed appropriate by management.The
letter of transmittal may literally that a letter from the chief finance officer addressed to the
chief executive and governing body of governmental unit or it may narrating over the
signature of the chief executive, either event, the latter of narrative material should cite legal
and policy requirement for the report and discuses briefly the important aspects of the
financial condition and finance operation of the reporting entity as a whole and the proper
annual report and changes expected during the coming year should be brought to the attention
of reader of the report (Emile, 1995).

Financial section of comprehensive annual financial report should include

1. An auditor report
2. General purpose financial statement
3. Combining individual fund and account group statement and schedules

Law relating to audit of governmental unit very markedly from state to state, in some all state
agencies all government unit created pursuant to the state law are required to be audited by an
audit agency of the state government. In other local government unit are audited by state audit
agency and some by individual certified public accountant, in any (Shirin, 2001).The financial
section should contain sufficient information to disclose fully and present fairly the financial
position and result of financial operation of governmental unit are contained detail by law of
higher jurisdiction and by the action of legislative branch of governmental unit itself. In
addition agreement with creditor other provide constraints over financial activities and
introduce financial reporting requirement an order to make expect you as a practice owner to
maintain proper accounting record and there are financial penalties if such record are not kept
and regularly updated(Hall M, 2009).In order to make it possible to determine and
demonstrate compliance with law.Regulation and agreement. The five combined statements
that comprise that must be included section of CAFR are,

1. Combined balance sheet – all found types and account group.

2. Combined statement or revenue, expenditure and change in fund balance.
3. Combined statement of revenue, expenditure and change in fund balance, budget and
actual, general and special revenue fund types and similar fund types for which annual
budget have been legally adopted.
4. Combined statement of revenue, expense and change retained earning or (equity) all
property fund types.
5. Combined statement of change in financial position all proprietor fund types.
2.3.1 Basic Principles of Governmental Accounting and Financial Reporting

Principles indicated the objective and goal of an organization. Once goal and objectives are
set than, principles describe the way in which this goal and objectives are attained. These
 principles are gradually updated by GASB (General Audit Standard Board) so that it enables
the profession to attain the formulated objectives. There are twelve principles of accounting
and reporting for governmental organization(Douglas, 1995).

2.4 Accounting Reporting Capabilities

The first principles about accounting and reporting capabilities of government owned
organizations. A governmental accounting system must make it possible both (a) to
presentfairly and with full disclosure the financial position and result of financial operation of
the fund and accounting group of the governmental entity in conformity with generally
accepted accounting principles (GAAP) and (b) to determine and demonstrate compliance
with financial related legal and contractual provisions(Douglas, 1995).

2.5 Overview of federal government of Ethiopia accounting system

The federal government of Ethiopia (FGE) accounting system used in 1994 E.C. (2001/2002)
has been in service for more than half century. The system has been revised at various times
and the revisions through time have brought major changes in recording, summarizing and
reporting of the government financial institution. The federal government of Ethiopia
accounting system achieves three goals: budget control, cash control, and accountability. This
study also partly tries to capture and discuss some of the issues pertaining to federal
government of Ethiopia accounting system as they are adopted by the university under
consideration. Aksum University uses (IBEX) Integration budget expenditure soft ware
system to help the organization employees. Because of its timely, reliability, easy to use and to
guide for their accounting records. Ibex is modern accounting recording soft ware.

As described in the federal government of Ethiopia accounting system, budget control is

achieved by the ability of accounting system. To report expenditure consistent with budgetary
principles similarly, cash control is achieved, among many others, by applying double entry
book keeping techniques. Using of double entry book keeping system is the most advantage
then using single entry book keeping system.Because it protects complexity of accounting
recording system. In addition to this no disadvantage is there in Aksum University. This
creates a set of self-balancing account ledgers or a general ledger, because the accounting
ledgers are self-balancing, accounting records are controlled. Thus, cash is also controlled by
double-entry book keeping. To this effect, now Aksum University is applying double-entry
 book keeping since from its beginning to by doing so the university achieves one of the three:
the cash control, employing a modified cash basis of accounting is also another way of cash
control.

As it allows the accounting system to recognize revenue and expenditure consistent with the
budgetary process and financial law.

The modified cash basis of accounting is consistent with the budgeting process and produces
information useful for comparing budgeted and actual revenue and expenditure.

The modified cash basis accounting system requires the same temporary accounts as the cash
basis of accounting plus permanent accounts namely, cash and cash equivalents, receivables
and payables. The federal government of Ethiopia accounting system employs a combination
of temporary and permanent accounts. As per discussion with the personnel in charge of the
accounting section), the organization, upon offering the concerned employees with adequate
training on the federal government of Ethiopia accounting system by experts from the federal
government, it is being applied by the organization.

The federal government of Ethiopia accounting system is organized in two sub systems:
accounting for transactions using a modified cash basis of accounting, and accounting for
other assets and liabilities using a cost method of valuation.Whereas gifted or donated assets
are recognized (valued) at market price or current fair value. This is if the donated assets are
not indicated their amounts. All account units’ account for transactions, accounting for other
assets and liabilities is a goal for all accounting units. Accounting for transactions means
accounting for daily economic activities. Transactions cause increases and decreases to
revenue, receipts from external assistance, expenditures, transfers, cash and cash equivalents,
receivables and payables.

2.6 Types of Accounting Practices

The accounting practice is an information system that enables us to make some important
deduction. It has sub- systems (Glautier U, 1997), the main ones being:

2.6.1 Purchasing system

This relates to the procurement of raw materials or merchandize inventories. It is carried out
by the purchasing department Each request is made on a requisition form stating the nature
and the quantity required which is signed by an authorized person. The purchasing department
selects a suitable supplier and sends a purchase order form setting out the description, quantity
and required delivery date of the goods, together with instructions as regards dispatch and
invoicing. The purchase order will refer to the quoted price of the goods according to the
supplier’s catalogue or other statements of the supplier price, although those quoted in
advertisements are not binding on suppliers. In effect, the purchase order form is an offer to
purchase and when accepted by the supplier constitutes a legal contract between buyer and
seller. Copies of the purchase order are distributed to the several departments concerned,
namely the receiving department which needs to know the details and the date of receipt of the
goods, the stock control department to advise of the pending arrival of goods and to serve as a
check on the receiving department, the accounts department for checking that the price quoted
compared with the list, and the ordering department, to confirm that the order has been placed

Kakande (2003) remarks that the purchasing system involves ordering, receiving and
payment for goods and services required by the organization. It consists of the following
stages. Identification of the need for the acquisition of goods and services.

Placement of an order - Requisition notes for purchases should be authorized by a

responsible official in the user department. All orders should be recorded on official
documents showing suppliers names, quantities ordered and the price.
Receipt of the goods and services -There should be a separate department or personnel to
deal with receipt of all goods. All goods should be checked for quantity and quality and goods
received notes should be raised for all the goods accepted (GRN); and GRN’s should be
sequentiallypre-numbered.
Financing and returns - The invoices should be signed and approved for payment by a
responsible official independent of the ordering and receipt of goods. All invoices should then
be entered in the purchases day book and posted to the purchases ledger. A record of goods
returned should be kept and checked to the credited notes received from suppliers.
Disbursement of cash- Cheques should be prepared with supporting documentation by a
responsible official independent of the purchases department. Cheques should be signed by
more than one person. Cheques should then be entered in the cash book.
According to Arora (1995), orders are placed through a central procurements department.
The originating department issues a purchase order to the vendor, routine purchases go
through a specified vendor and non-routine ones go through tender procedures on receipt of
goods, the receiving department checks for quality and quantity after which a Goods Received
Note (GRN) is prepared. This provides a basis for paying the vendor. For services, evidence
must be there that services were rendered. It may take the form of acceptance report
signifying completion of services. Payment is approved in light of prices and quantities
specified on the order. A voucher is prepared and attached to all supporting documents for
example invoices, Goods Received Note and purchase order after approval of all these
documents, disbursements by cash or checks are made. The accounting practices included in
accounting for purchases cover two aspects that include

Receipt of goods and services- Purchases received should effectively be inspected for
quality, quantity and conditions. On receipt, they should be acknowledged by GRN

The disbursement of company resources - All payments should be authorized and suppliers
paid the right amount at the right time.

2.6.2 Payroll system.

This relates to payment of wages and salaries, commissions, withholding tax and other
deductions. Manipu1ation of the wages record is probably one of the easiest ways of
concealing substantial misappropriation of cash and therefore the most commonly resorted to.
It is therefore imperative that wage recording and payments are dealt with by the business in a
systematic manner that adequate checks are in place. Payroll management should involve; the
maintenance of a permanent record for each employee, recording of time worked the
calculation and recording of wages and authorized deductions, disbursements to employees
and allocations in the books of account (Arora, 1995).

While Byaruhanga (2007) states that, the pay roll procedures can be generally put into the

following broad categories; engagements, promotions, transfers and discharges of employees;

time attendance and job recording, preparation of payroll and analysis of wages salaries and
payment of wages and salaries. The following duties should be segregated in a big firm
payroll; preparation, payroll authorization, payment of wages/salaries and personnel.
Byaruhanga (2007) further notes objectives of payroll system as the computation of wages
and salaries are only in respect of the firm’s employees, wages and salaries are in accordance
with the salary scales or with records of work performed in terms of time, output,
commissions on sales, the payment is calculated accurately, payment is made to the correct
employees including unclaimed wages; payroll deductions are correctly and accounted for
and paid to appropriate parties at the correct time, cash in the office and the money in the
banks is safe guarded and all payroll transactions are accurately recorded and processed in
the accounting records. Thus the above objectives are set to minimize the following risks
with the payroll that could lead to financial losses thus low profitability levels. They include
ghost workers, late payment causing staff discontent, wrong and late payments to URA and
NSSF leading to fines and penalties, unauthorized or delayed bonus and fraud.

2.7 General ledger Accounting system and reporting in government

Organization
It involves maintenance of journals and ledgers for recording and classifying the traditional
financial transactions. It usually extends to the preparation of the trial balance and the formal
financial statements.

Omunuk (1999) stresses that the general ledger is the main ledger of an organization. It is
supposed to contain all the ledger accounts of the organization. In case there are too many
accounts in the organization, it is only the control accounts that should appear in the general
or main ledger and others are recorded in the subsidiary ledgers. In manual accounting
system, the general ledger is a big bound book with hard covers. Each page in the book
represents an account.

As observed, the general ledger is supposed to contain all accounts of that organization.

In addition firms large enough to divide its journal into day books and cash books will
probably also need to divide its ledger. The sales ledger contains all the personal accounts of
the firm’s customers. The creditor’s ledger contains the personal accounts of the firm’s
suppliers. The main reason for dividing the ledger is that it allows several people to be
engaged. In the recording process and permits sectionalisation of the work around these
groups of accounts.
However, Shirin, (2001) emphases that the nature, size, environment and information
requirements determine the number of accounting practices. Consequently a great deal of
diversity exists in the accounting practices adopted by different countries. This diversity has
the potential to distort financial communication when business is conducted beyond national
boundaries, thus limiting the success so far. There is need to increase the compatibility of
accounting practices by specifying the limits to their degree of variation. Thus efforts to
harmonize accounting practices of the nations of the world would eliminate much of the
prevailing diversity and increase the international flow of investment capital, there by
promoting world economic growth and development

2.8 Accounting system and reporting in government organizations

2.8.1 Basic accounting concepts

Chart of Accounting:-

The federal Government of Ethiopia (FGE) manual (2002) indicates that has of account is
system of coding used by financial management to identify and classify financial entities and
events. The current chart of accounts of FGE has detailed code as temporary accounts which
begin each year with Zero balance it also has permanent account whose balance at the end of
the year becomes the beginning if the next year balance, Revenue and expenditure are
temporary account. However, asset, liability and equity are permanent accounts

2.8.1 Basic Accounting concept

According to FGE manual (2002) the basis of accounting is the principles and rules employed
by accounting system to determine when and how to record transaction. The FGE accounting

system employees modified cash basis of accounting. Modified cash base accounting means
cash base are applied for recognition of the following the transactions.

 Revenue and expenditure are recognized when aid in kind is received

 Expenditure is recognized when payroll is processed , at the end of the near when grace
period payable is recognized , if payment to goods or services was rendered in advance
and when cash moves from unrestricted to restricted bank account

 Inter-governmental transfer
  Transaction resulting from salary with holding

2.8.2 Book keeping method:-

The FGE accounting system uses double entry book keeping. According to FGE double entry,
accounting system means that both aspect of each transaction is recorded at least with one
debit and one credit.

2.8.3 FGE Accounting System

The FGE accounting system is arranged in two sub systems: - accounting for transaction
using modified cash of accounting and accounting for assets and liabilities using a cost
method of valuation. Accounting for transaction means accounting for daily economic
activities. Most transactions of FGE involve domestic currency.

2.9 Limitations of accounting procedures Practices

Accounting procedures provide reasonable assurance with management objectives over

resource use as a system is achieved, because the effectiveness of accounting procedures!
Practices are hindered by several factors that are faced by post bank like any other
organization.

 Accounting practices based on segregation of duties can be avoided by collusion and

authorization. This is manifested in human errors such as errors in judgment,
interpretation, misunderstanding, carelessness, fatigue or distraction that may undermine
the effectiveness of the practices, procedures (Kamal, 1997).

 During the last decade, changes in competition and production environment, changes in
the cost structures of firms(Dixon, 1998), and the rapid development in advanced
information technologies have been advocated as imposing pressures for change in
accounting practice(Xiao et. al, 1996).

 More importantly, the changing circumstances in the business environment may cause
inadequacy in procedural conduct of business and there by compliance with usual
procedures becomes difficult or deteriorates with time.

 Management is frequenting in positions that override controls, which it has itself set up.
This usually comes about as a result of methods and business practices that management
 adopts to evaluate promote and compensate employees. If the methods and practices
adopted are not clear then the person with whom authority is vested will abuse such
controls and instead use to their best benefits

 Lastly most of the procedures are directed to anticipate usual type of transactions and not
the unusual type, therefore transactions of unusual nature may not fall within the preview
of accounting procedures hence limiting their effectiveness. These limitations can only be
minimized by reviewing the effect of accounting practices on financial performance of the
organization.

 Reporting and accounting information are used for planning, resources allocating and
collective decision making for managers

2.10 Empirical evidence

Researchers have been carried out on the accounting practice of deferent organization. So this
part of the paper presents the empirical evidence on the idea of the paper. The empirical evidence
below is presented consecutively based on the concept of evidence.

2.10.1 Accounting practices

The empirical evidence about the accounting practice of large and medium scale enterprise is
organized in terms of evidence such as; record keeping, financial accounting, financial
management and cost and management accounting. The literature looks at the importance of
accounting systems on the basis of its application in assessing the performance of businesses by
all stakeholders. Olson et al. (2004) argues that accounting information users in SMEs is on the
increase. Another aspect of the studies claim that, in the process of planning for profit, financial
information is assembled in a way that can help make informed judgment and take decisions
concerning the organisation (Copeland & Dascher, 1978). An accounting system is one of the
most effective decision making tools of management. It provides an orderly method of gathering
and organising information about the various business transactions so that it may be used as an
aid to management in operating the business. An emphasis is laid on the significance of keeping
proper books of accounts by Biryabarema (1998) because it enables small businesses to have
accurate information on which to base decisions. SMEs project purchase and sales, determine
break-even point, and make a wide range of other financial analyses based on accounting
information. The study contends that, lack of proper accounting records has seen the closure of
some businesses, and thus makes it a significant issue for business success.

Other studies assert that the high incidence of failure among SMEs could be attributed to the
poor accounting systems used by these enterprises (Ofonagoro, 1983). Those studies recount that
since accounting systems play a key role in determining business growth and profitability, there
is a need to evaluate the accounting systems used by SMEs. This is important because for
optimum business growth, SMEs must make use of a system of accounting which will enable
them determine the volume of sales, profits (or loss), assets and liabilities at any given time.
According to Lybaert (1998), the quality of accounting information utilized within the SME has
a positive relationship with an entity‟s performance and survival. Similarly, it has been
emphasized that there is the need for financial information for small and micro business units
due to the volatility normally associated with their situation such as unstable cash and profit
positions, and reliance on short-term borrowing (McMahon & Holmes,1991; Dodge, Fullerton &
Robbins, 1994).

Kinney (2001) posits that accounting is one of the important types of information for decision
making both within and outside the organization. He further states that the quality of this
information gauged by its relevance and its reliability for a particular decision is equally
important.

Osuala (1993), many enterprises record their transactions randomly without adherence to any
established systems of accounting; hence making it difficult in keeping track of the cash flows in
the enterprises.

Mitchel et al. (2000) argued that accounting information could help SMEs manage short-term
problems in such areas as costing, expenditure and cash flow by providing information to
support monitoring and control. Knowledge of cash-flows according to Pandy (1991) is very
important because cash-flows are inseparable parts of the business operations of firms. Peren and
Grant (2000) noted that decision making processes in small scale enterprises are more
sophisticated than anticipated but they lacked effective accounting information and control
system to support their decisions. Furthermore, there is some evidence to suggest that small firms
are aware of the importance of accounting information (International Federation of Accountants
, 2006). In spite of this awareness, most owners of small entities in Ghana are not too keen to use
standard accounting systems to run the day-to-day activities of their enterprises. The high rate of
failure of small scale enterprises in developing countries like Ghana, has generally been traced to
poor management and accounting systems employed by these enterprises (Ofonagoro, 1983).
There seems to be some consensus on the significance of financial accounting systems to
business success. Some researchers assert that the quality of financial accounting information
employed within the SMEs sector has a positive relationship with the performance of the entity
(see, Lybaert, 1998; Nayak & Greenfield, 1994; Holmes & Nicholls, 1989; Raymond &
Magnenat-Thalman, 1982). Poor record keeping is also cited as a cause for start-up business
failure. In most cases, this is not only due to the low priority attached to it, but also a lack of the
basic business management and skills. Most business operators, therefore, end up losing track of
their daily transactions and find it difficult to account for their expenses and their profits at the
end of operations. According to

Wichman (1983), accounting is a major challenge to management of SMEs. The study

recommends that SME managers and/or owners need to learn about proper accounting or engage
the services of accounting experts for accounting reporting purposes.

Some authors believe that accounting reports play a significant role in SMEs. However, they
argue that such accounting reports must be customised to suit the needs of SMEs. There have
been proposals that the use of the cash basis must be preferred the accruals basis of accounting.
A study by McMahon (1999) finds that financial reporting practices in SMEs appear to fall short
of the standards recommended by various external financial information users imperatives that
exist for them, and further claim that SME managers/owners appear mostly reluctant to produce
financial reports which might become accessible to outside parties either through the regulatory
authorities or directly.
 CHAPTER THREE

3. RESEARCH METHODOLOGY

3.1 Research design

This study was conducted by using both qualitative and quantitative research design.

Qualitative Research

Qualitative Research is primarily exploratory research. It is used to gain an understanding of

underlying reasons, opinions, and motivations. It provides insights into the problem or helps
to develop ideas or hypotheses for potential quantitative research. Qualitative Research is also
used to uncover trends in thought and opinions, and dive deeper into the problem. Qualitative
data collection methods vary using unstructured or semi-structured techniques. Some common
methods include focus groups (group discussions), individual interviews, and
participation/observations. The sample size is typically small, and respondents are selected to
fulfil a given quota.

Quantitative Research

Quantitative Research is used to quantify the problem by way of generating numerical data or
data that can be transformed into usable statistics. It is used to quantify attitudes, opinions,
behaviors, and other defined variables – and generalize results from a larger sample
population. Quantitative Research uses measurable data to formulate facts and uncover
patterns in research. Quantitative data collection methods are much more structured than
Qualitative data collection methods. Quantitative data collection methods include various
forms of surveys – online surveys, paper surveys, mobile surveys and kiosk surveys, face-to-
face interviews, telephone interviews, longitudinal studies, website interceptors, online polls,
and systematic observations

3.2 Source of data and data collection techniques

3.2.1 Source of data

To prepare the research paper the source of data was from both primary and secondary data.
Primary data would be including from individual person who were being selected as a sample
respondents whereas secondary data was gathered from different reference books, from the
organization accounting records etc.

3.2.2 Method of data collection

For conducting effective study, accurate and reliable data are crucial. In order to arrive at a
good conclusion both primary and secondary data will be used in this study. Primary data
was collected by means of observation, distributing questionnaires to the selected
respondents. The questionnaires would be attributed from both open ended and closed
ended questions. Secondary data was organized from different manual, financial reports,
company records.

3.3 Target population and method of sampling

The study was used census sampling technique because the study needs contact with the
finance department and the numbers of respondents are small. The total target group of the
study are employees; there are 9 employees in finance department of of Dire Dawa city
Water supply and sewerage Authority the researcher was selected these employees to get
the necessary data .

3.4 Method of data analysis and presentation

To make the research to be more coherent and attractive, the research was analyzed by
using descriptive method of data analysis. Because this method of data analysis is used to
describe the accounting practice of the organization that it apply. After the necessary data
would be collected then the the researcher was be present the finding of the study in from
of tables and percentage.

Descriptive techniques often include constructing tables of means and quantiles, measures
of dispersion such as variance or standard deviation, and cross-tabulations or "crosstabs"
that can be used to examine many disparate hypotheses
 CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND FINDING

The researcher has distributed self-administered questions to the selected staff of the
organization that are directly responsible for the accounting practice of the organization. In
order to gather data about the accounting practice of the organization, the researcher has
mainly used questionnaires with the selected employees and based on that the collected data
were analyzed and interpreted in the following sections.

4.1. General question

The staff members have been asked whether they have a clear understanding of accounting
practice and reporting which the first question just as a brainstorming was.

Table 4.1.: Personal information

No  Item Response
No %
1.1 Gender
. Male 3 33
6 67
Female
Total 9 100
1.2 Age category

18-24 -  -
3 33
25-35
2 22
36-45
4 45
Above 45

Total 9 100%
No  Item Response
No %
1.3 Educational level

Certificate holder - -
- -
Diploma
9 100
First Degree
- -
Master and above

Total 9 100%

1.4 Work experience

- -
Less than one year
- -
1-2 years
-
-
3-6 years
4 44
Above 6 years
5 56

Total  9  100%
Source: Own survey, 2022

Personal information:-The department has 3 males and 6 females totally 9

employee having BA degree in Accounting, and more than 3 years’ experience and
their age groups are 25 and above.

4.2 .Accounting practice of Dire Dawa Administration Water Supply and

Sewerage Authority
Table 4.2:1 The opinion of the respondent regarding to understanding of
accounting practice of the organization.

No  Item Response
No %
2.1 Accounting practice of the institution
Yes 7 77
No 2 23

Total 9 100%
Source: Own survey, 2022

As it is indicated above, the most of organization financial department employee

has a clear understanding of the accounting practices, but some has a limitation..

Table 4.2:2 The opinion of the respondent regarding to preparation of

financial statement ,and report

2.2 financial report coverage of all funds and

financial transaction prepared according to
GAAP
Yes 9 100
No - -

Total 9 100%
Source: Own survey, 2022

As it is indicated above, the organization has a clear understanding of the accounting

practices even through some has accounting practice limitation their financial report cover
all funds and financial transactions. This is the result of the profession qualification and
short-term (on job) trainings given by the organization.

4.3. Valuation of assets and methods of accounting

 Two interrelated questions were raised concerning the valuation and methods of accounting
for fixed asset. The respondents have answered as follows.

Table 4:3 the opinion of the respondents concerning the valuation of fixed asset and
accounting method

No  Item Response
No %
2.3Accounting method use to record and analyze
. financial data.
Accrual basis 9 100
Cash basis - -
Modified - -
Total 9 100%
  Source: Own survey, 2022
It is clear that the donated fixed assets of the organization valued on the basis of original cost or
the appraised value at the time received (current fair market value). Though, the entity uses those
methods, the general rule for recording of fixed assets in accounting is to record those at cost and
fixed asset donated are capitalized

 The accounting method usually followed by the entity is accrual  bases of accounting
 The generally accepted accounting standards require that financial statement for
governmental entities like Dire Dawa Administration Water Supply and Sewerage
Authority be prepared using accrual basis of accounting. Thus, revenues are reported
when goods and services are delivered and given respectively, and expenses recognize
when incurred.

4.4. Accuracy of record keeping (Book keeping)

The staff members have been asked whether records are updated and reconciled and the
reliability of each transaction, the respondent replied as follows:

Table 4.4.1 the opinion of the respondent about the accuracy of record keeping:
No  Item Response
No. %
 2.4. Timely reconcile and update records
Yes 9 100
No - -
Total 9 100%
Source: Own survey, 2022

As it is indicated above, Dire Dawa Administration Water Supply and Sewerage

Authority have accurate recording, summarizing, abdate and reconcile its record
timely.

Table 4.4.2 The opinion of the respondent about the reliability measurability
clearness of transaction

2.5 The reliability, measurability and clearness of

transaction.
Yes 7 78
No 2 22

9 100%
Total

Source: Own survey, 2022

As it is indicated above, Dire Dawa Administration Water Supply and Sewerage Authority
transactions have maintain reliability clearness and measurability. This can be proved or done
by:

 Checking the controlling ledger /general ledger with trail balance.

 Recording each transaction on the cost control sheet and reconcile with general ledger
from Peachtree accounting records.

4.5 Financial statement of Dire Dawa Administration Water supply and Sewerage
Authority
 Two interrelated questions were raised regarding to financial statement preparation, reliability
and relevance of financial statement.

Table 4.5.1The opinion of respondents regarding to produce, timely financial statement

No  Item Response

No. %

2.6 The system produce financial statements timely

Yes
No 9 100
- -

Total 100

 Source: Own survey, 2022

The financial statement of the organization is prepared timely (periodically) to control

financial operations. Financial statements and schedules are prepared directly and exclusively
from the accounts at the closing of each fiscal year for both internal and external parties to
get financial aid, donations and others.

Table 4.5.2 The opinion of respondents regarding to reliability and relevance financial
statement preparation:.

2.7 The reliability and relevance of financial

statement.
Yes 7 78

No 2 22
9 100%
Total
 Source: Own survey, 2022
Financial statements prepared by the organization are relevant and reliable to the end users. As
most respondent answered .This due to:  Recording general ledger, expenditure recording
format and agree with reporting format. Financial statements are expressed in the Peachtree
format and agree with report format in general, reliable financial statements are produced for
internal and external parties that are helpful to get additional funds.

4.6. Financial reporting of Dire Dawa Administration Water Supply and Sewerage
Authority

Regarding to the financial reporting of the organization the respondent replied as follows:
Table 4.6: The opinion of the respondent regarding to financial reporting system

No  Item Response
No %
2. Timely preparation and reporting of financial
8 statements.
Yes 9 100
No - -
Total 9 100%
Source: Own survey, 2022

The financial reporting system of Dire Dawa Administration Water Supply and Sewerage
Authority is prepared timely (periodically) to control financial operations. Financial
statements and schedules are prepared directly and exclusively from the accounts at the
closing of each fiscal year for both internal and external parties to get financial aid, donations
and others.

4.7. Budgeting system in Dire Dawa Administration Water Supply and Sewerage
Authority

Regarding this specific issue the organization budgeting system, budget variations and its
effect on reporting practice have been replied as follow
Table 4. 7.1 The opinion of the respondent regarding to the budgeting system
No  Item Response
No %
2.9 Variations between budgeted and actual amounts
Yes 6 67
No 3 33
Total 9 100%
Source: Own survey, 2022

 The responses given indicated that the organization faces variation of budget .the
organization prepares a budgeted fund at the beginning of fiscal period to provide
service with available resources. Each level of management participates in the
preparation of budget. Lower level management prepared budget for their
activities. The middle and top level management executes the budget contacting
with the former practice of the physical period.

Table 4.7.2 The opinion of the respondent regarding to the effect of

budgeting variation

2.10 Do the variation(if any)have an effect on reporting

practice
Yes 3 33
No 6 67
Total 9 100%
Source: Own survey, 2022

The organization usually faces deviations (variations) between the budgeted and actual
amount as most respondent answered, this because of current market situation, and affect the
organization not to accomplish its goals & objectives. Even though most respondent sayed no
effect on reporting practice, the researcher may suggested that the variation might create
difference in reporting year end budget implementation report.

4.8. Internal control system of Dire Dawa Administration Water Supply and Sewerage
Authority
Regarding to internal controlling method and pre-numbed documents for accounting purpose
the staff members answered as follows.
Table 4.8: 1 the opinion of the respondents regarding to the internal control system

No  Item Response
No %
2.11 Methods of designing and implementing
control system.
Yes 8 89
No 1 11
Total 9 100%
Source: Own survey, 2022
Internal controlling mechanism of the organization replied by the respondents show that
the organization has strong internal control system because it uses different methods of
designing and implementing controlling system.
Some of the controlling methods of the organization:-
  Monthly cash count
 Bank reconciliation to control cash at bank and the entity book balance
 Follow procurement procedures, use serially numbered invoices.
 Check general ledger records.
 Use pre-numbered documents for accounting.
In general, the controlling mechanisms of Dire Dawa City Water Supply and Sewerage
Authority were very strong that enables them to minimize corruption, frauds and
errors.
Table 4.8:2 The opinion of the respondents regarding to to use of pre-numbered
system
2.12 Pre-numbered documents for accounting
purposes.
Yes 7 78

No 2 22
Total 9 100%

Source: Own survey, 2022

Internal controlling mechanism of the organization provided by the respondents show that the
organization use different methods of designing and implementing controlling system and
using of pre-numbered document that enables the organization to protect and detect errors,
frauds and corruptions.
4.9. Accounting manuals and consistency with FASB standard.

Two questions were replied by the respondent about the organization’s accounting manual
and consistency with FASB standard

Table 4.9.1 The opinion of the respondents regarding to prepare its financial statement
according to FASB.

No  Item Response
No %
2.1 Preparation of financial statement in accordance
3 with financial accounting standard board (FASB).
Yes  2  22
No 7 78
Total 9 100%
Source: Own survey, 2022
From the tabular information provided, respondents replied that the organization has not
prepares its financial statement according to financial accounting standard board (FASB).This
response is contradict with table 4.2.2 that the financial report of the organization prepared
according to GAAP, so this shows there is a knowledge gap between the employee.
Table 4.9.2 The opinion of the respondents regarding to Accounting Manuals
2.1 The presence of accounting manual in accounting
4 system.
Yes 4 44
No 5 56
Total 9 100%

 Source: Own survey, 2022

 From the tabular information provided, respondents have not clear understanding about the
presence of accounting manual in the system ,so as indicated above the system does not have
accounting manual that guides procedures in recording, summarizing, evaluating and
interpreting accounting transactions as well as reporting to the end users .
4.10. Allocation method of fixed/plant asset
Regarding to the allocation of fixed/plant asset of the organization the respondent replied as
follows:
Table 4.10 The opinion of the respondents regarding to the organization allocation of
plant asset

No  Item Response
No %
2.15 method of allocation used for plant asset in your
organization?
Straight line  9  100
double decline - -
sumof the year digit - -
unit of measurement - -

Total 9 100%

Source: Own survey, 2022

From the tabular information provided, respondents answered the organization used straight line
methods of allocation of plant /fixed/asset, because this method is simple to used. With
the straight line depreciation method, the value of an asset is reduced uniformly over each period
until it reaches its salvage value. Straight line depreciation is the most commonly used and
straight forward depreciation method for allocating the cost of an asset. It is calculated by simply
dividing the cost of an asset, less its salvage value, by the useful life of the asset.
 CHAPTER FIVE

CONCLUSION AND RECOMMENDATION

5.1. Conclusion

 Based on the primary data analysis the researcher has tried to study and explain the
accounting practice of Dire Dawa Administration Water Supply and Sewerage
Authority, Dire Dawa Administration Water Supply and Sewerage Authority Financial
Department employees or members have a clear understanding of accounting practice
and reporting system ,but some employee has gap of knowledge .
 Dire Dawa Administration Water Supply and Sewerage Authority has a better record
keeping systems. Thus recording, summarizing and evaluating process are accurate
and relied with generally accepted accounting practice (GAAP), according to primary
data analysis ,but the employee do not have clear understanding between GAAP and
FASB.
 Financial statements are prepared to meet financial users, and financial reports are
prepared periodically.
 Based on secondary data analysis the some financial statement is not reliable .not
accurate and not reconcile or adjusted timely and not closed. us observed from
secondary data analysis this indicates limitation of knowledge with in employees, and
weak internal control system.
 Generally ,Dire Dawa Administration Water Supply and Sewerage Authority has poor
Accounting practice system according to my assessment.
5.2 Recommendation

All over activities of the organization have been tasted in the examination of the accounting
practices as discussed above. The following points are important for the improvement and
wellbeing of the entity.
 Donated fixed assets are valued at their original costs but, the general rule for
recording fixed assets account is at its current fair market value or the net
 appraised value. Because accounting and reporting helps to the organization to
deduct depreciations that were recorded in the memorandum forms. So, valuation
of fixed assets at their current fair market value might be considered. 
 The data analyzed in the assessment shows that some employees of financial
department of this organization have limitation of knowledge ,so Dire Dawa
Admiration Water Supply and Sewerage Authority should solve those problems
having discussion, and support the employee by giving training, and create
conducive environment for further education.
 Preparation of financial statements should be standardize, and prepared according
to FASB. Dire Dawa Administration Water Supply and Sewerage Authority
mainly concerned with preparation of statement of revenue and expenditure and
balance sheet, and statement of cash flows, But FASB illustrates financial
statement to include, statement of functional position, a statement of activities, and
financial statement disclosures.
 In general government bodies like Ministry of finance economic development
(MOFED) should help the institution to help the financial circulation system and
reporting practice of the organization.
 The organization should need to have strong internal control that over seen all
records and their accounting practice.
 The responsible party should follow up this organizations accounting practice ,and
need to give capacity building to the employee.
 DIRE DAWA UNIVERSITY
COLLEGE OF BUSINESS AND ECONOMICS
DEPARTMENT OF ACCOUNTING AND FINANCE
QUESTIONNAIRES
The purpose of this questionnaire is to obtain data for a research project conducted by
ABRAHAM BEYENE on the topic “Assessment of accounting practice in governmental
institution in a case of Dire Dawa City Water supply and sewerage Authority in partial
fulfillment of the requirements for the award of BA in Accounting and Finance.

Your cooperation in filling out the questionnaire carefully and genuinely, contributes a great role
towards the success of your organization as reasonable output of the study can serve as reference
point or indicator where the organization primarily center around to look for change.

Please note that the researcher, in this regard, assure you that it is not a test of competence; and
all the information you provide will be confidential and is to be used only for research purpose.

NB. Please note that you can choose more than one alternative given if important. And use a tick
mark (√) in the box (es) you select!!!

Instructions;- Note that :-

1. No need to write your name

2. Please fill the answer by making "  " marks

3. Please give more attention and complete as fast as possible-

1. Personal information

1.1. Gender a) Male b) Female

1.2. Age category a) 18-24 b) 25-35 c) 36-45 d) Above 45

1.3. Educational level a) Certificate holder b) Diploma c) First Degree d)

Master and above

 1.4. Work experience a) Less than one year b) 1-2 years c) 3-6 years d)

Above 6 years
2 Detail working information
2.1 .Do you have a clear understanding of the accounting practice of your organization?
Yes No
2.2 .does the organization prepares financial statement / report according to GAAP?
Yes No
2.3 . What kind of accounting method you use to record and analyze financial data?
Accrual basis
Cash basis
Modified
2.4 . Does your organization reconcile and update its record timely?
Yes No
2.5 . Does each transactions are measurable, reliable, and clear? 
Yes No

2.6 . Does the system produce and report financial statements timely?

yes N0
2.7 . Is your financial statement reliable and relevant?
Yes No
2 .8 . Does the system produce and report financial statements timely?
Yes No
2.9 . Do variation exist between budgeted and actual amount?
Yes No
2.10 .Do the variation(if any) have an effect on reportig practic?
Yes No
2.11 .Does the organization use designing and implementing control system?
Yes No
2.12 Does the organization use pre-numbered documents for accounting purposes?
Yes No
2.13 Does your organization prepare its financial statement according to financial
accounting standard board (FASB) statement?
Yes No
2.14 Does your accounting system have accounting manual?
Yes No

2.15 What method of allocation is used for plant asset in your organization?
Straight line double decline sum of the year digit
unit of measurement

Thank you for your cooperation

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