Eth GVT Handout2

UNIT 3: RECORDING COMMON TRANSACTIONS OF FGE
CASH TRANSFERS
Cash transfers are cash movements among government units. Cash transfers may be made in the
form of currency, checks or direct cash movement between bank accounts. There are different
forms of cash transfer that are discussed hereunder:
Cash Transfers between Bank Accounts at Public Bodies and MOFED
Cash can be transferred from MOFED bank accounts to bank accounts of public Bodies and also
from bank accounts of public Bodies to MOFED. These transfers are done in the form of:
 Checks
 Direct bank transfers evidenced by bank advices.
When cash is transferred from a public Body or from MOFED, a payment voucher is prepared
as the source document for entry in the transaction Register. When Ge/Be/We 12/1 (a document
used by MOFED to order banks) is received from MOFED, a Receipt Voucher is the source
document. The Receipt Voucher should be prepared when Ge/Be/We 12/1 is received; when the
bank advice is received, it should be attached with the Receipt Voucher and the Ge/Be/We 12/1.
Until the bank advice is received, this will be a reconciling item for the bank reconciliation. Cash
transfers between bank accounts at public Bodies and MOFED are reported monthly in the
month they occur. MOFED maintains a subsidiary ledger for each transfer account code. The
subsidiary ledger accounts are established for each public Body. Subsidiary ledgers aid
consolidation in the general ledger of MOFED and improve cash control (MOFED and DSA
Project manual, December, 2002).
Cash Transfers from MOFED to public Bodies
According to MOFED and DSA Project December 2002, Cash transfers from MOFED bank
accounts to bank accounts of public Bodies are recorded:
By MOFED, as a debit to the appropriate transfer code and a credit to 4105, and
By the public Body, as debit cash at Bank 4103 and a credit to the appropriate transfer code.
Example: Recording Cash Transfers from MOFED to PB

Assume a public Body receives from MOFED a transfer of Birr 400,000 for Capital expenditure
and also further assume that you are an accountant in both the PB and MOFED
You are required to show how this transaction could be recorded on MOFED and PB's
transaction register.
Note that: every transaction is recorded in such a manner shown under the table and you must
follow the procedures. Cash related transactions are recorded under cash at bank column and
other non-cash related transactions are recorded under the other column of the register.
Transaction Register of MOFED:
No Description TB Account Others Cash at bank 4105
Number
Dr Cr Dr Cr
1 Cash transfer to PB -- 4004 400,000 400,000
1
Transaction Register of Public Body:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Cash transfer - 4004 400,00 400,000
from MOFED 0
At MOFED, although a transfer authorization to one bank account may include funds for more
than one BI, the entire transfer is one. Therefore, only one entry should be made for the total of
the transfer in the Transaction Register maintained at MOFED. The BI code for the entry should
be the BI code of the Reporting Entity.
If the bank charges a service charge for the transfer:
 The service charge should be recorded as a debit to account code 6256.
 Cash at bank 4103 should be debited for the amount of cash actually received.
 The appropriate transfer account code should be credited for the gross amount of the
transfer.
Example: MOFED transfers Birr 200,000 to a public body for capital expenditure. The bank
deducts 4000 birr as a service charge; the public body receives Birr 196,000.
No Description type of Account Others Cash at bank
budget Number 4105
Dr Cr Dr Cr
1 Cash transfer to PB 4004 200,000 200,000
No Description type of Account Others Cash at bank
budget Number 4103
Dr Cr Dr Cr
1 Bank Service Charge 02 6256 400
0
Cash transfer from 4004 200,000 196,000
MOFED
Cash Transfers from Public Bodies to MOFED at federal level
Cash transfers from bank accounts of public Bodies to MOFED bank accounts are recorded:
By MOFED, as a debit to Cash at Bank 4105 and a credit to the appropriate transfer code, and
By the Public Body, as a debit to the appropriate transfer code and a credit to Cash at Bank
4103.
Example: A Public Body collected revenue of Birr 90,000. The cash is transferred to
MOFED.
Transaction Register of MOFED
Number 4105
Dr Cr Dr Cr
1 Cash transfer from PB - 4009 90,000 90,000
Number 4103
Dr Cr Dr Cr
2
1 Cash transfer to MOFED - 4009 90,000 90,000
Some public Bodies deposit cash directly into a MOFED bank account when revenue is
collected. If revenue is deposited directly to a MOFED bank account, the entry in the
Transaction Register of the public Body is a debit to the appropriate transfer account code and a
credit to the appropriate revenue account code (MOFED and DSA Project manual, December,
2002).
Cash Transfers between MOFED safe and Public Bodies
According to MOFED and DSA Project manual, January 2002, the Treasury Department at
MOFED maintains a safe. Public Bodies can withdraw a maximum of Birr 2,000 from the safe
(petty cash fund) with appropriate approval. Cash from the safe should be requested using
Ge/Be/We 11/ when cash is paid from the safe, a cash payment Voucher is prepared for payment
to the appropriate BI. MOFED-CAD records the Cash payment Voucher as a transfer in the
Federal Transaction Register. The public Body records the Cash payment Voucher as a transfer
in its Transaction Register.
Example: A Public Body provides Ge/Be/We 11/2 to Treasury Department for payment of Birr
1,000 from the safe at MOFED. This transaction will be recorded under cash in safe of PB and
MOFED.

No Description TB Account Others Cash in Safe
Number 4101
Dr Cr Dr Cr
1 Cash transfer - 4002 1,000 1,000
Transaction Register of public Body:
No Description TB Account Others Cash in Safe
Number 4101
Dr Cr Dr Cr
1 Cash transfer - 4002 1,000 1,000
Cash Transfers between Public Bodies
Cash transfer can also occur between public bodies other than MOFED. Cash may be transferred
from a bank account of one public body to a bank account of another public body. These
transfers are done in the form of:
 Checks
 Direct bank transfers evidenced by bank advices.
When cash is transferred out of a public body's bank account, a payment voucher is prepared as
the source document for entry in the transaction register. When transfer is received in cash, a
receipt voucher is the source document.
Cash transfers between Public Bodies are reported monthly, in the month that they occur.
According to MOFED and DSA Project manual, December 2002, Cash transfers from a bank
account of one public Body to a bank account of another public Body are recorded:
By the public Body sending the cash, as a debit to transfer code 4008 and a credit to cash at
Bank 4103, and by the public Body receiving the cash, as a debit Cash at Bank 4103 and a credit
to transfer code 4008.
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Example: Public Body #1 transfers Birr 190,000 to public Body #2.
Transaction Register of public Body #1:
Number 4103
Dr Cr Dr Cr
1 Cash transfer to PB #2 - 4008 190,000 190,000
Transaction Register of public Body #2:
Number 4103
Dr Cr Dr Cr
1 Cash transfer from PB - 4008 190,000 190,000
#1
Cash Transfers within Public Body
In the same manual prepared by MOFED&DSA Project, it is indicated that some public bodies
maintain branch bank accounts. The public Body may transfer cash from one bank account to
another bank account of its branch. These transfers are done in the form of:
 Checks
 Direct bank transfers evidenced by bank advices.
NOTE: The branch bank account may be treated as an Accounting Unit or as a Safe.
If the branch bank account is treated as a safe, a cashbook is maintained for each bank account.
If the branch bank account is treated as an Accounting Unit, a transaction register is maintained
for each bank account, and the public body maintains a consolidated general ledger for all
transactions recorded in a transaction registers. The consolidated general ledger is the source
document for monthly reports to MOFED.
When cash is transferred from a bank account, a payment voucher is prepared as the source
document for entry in the transaction register of that bank account. When cash is received by
transfer into a bank account, a receipt voucher is the source document for entry in the transaction
register of that bank account.
Cash transfers within a public body from bank Account #1 to bank Account #2 are recorded:
By the accounting unit for bank Account #1, as a debit to transfer code (transfer between
financial bureau and wereda finance/ district finance office) 4011 and a credit to cash at Bank
4103, and by the accounting unit for bank account #2, as a debit cash at bank 4103 and a credit
to transfer code 4011.
After both transactions are recorded in the consolidated general ledger of the public body, the net
effect of the internal transfer is zero (the balance in transfer code 4011 is zero).
For control purposes, if the public body transfers to more than one branch bank account, a
subsidiary ledger should be maintained by the main bank account. Each branch bank account that
receives or sends a transfer using account code 4011 should have its own subsidiary ledger card
under transfer code 4011. This will aid consolidation in the general ledger of the public body and
improve cash control within the public Body.
Example: Bank Account #1 transfers Birr 60,000 to Bank Account #2
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Transaction Register of Bank Account #1:
Number 4103
Dr Cr Dr Cr
1 Cash transfer to BA #2 - 4011 60,000 60,000
Transaction Register of Bank Account #2:

No Description TB Account Other Cash at bank
Number 4103
Dr Cr Dr Cr
1 Cash transfer BA #1 - 4011 60,000 60,000
Check you progress!

Record the following transactions in the book of records under responsible public bodies.
1. MOFED transferred birr 45,000 to Ministry of agriculture for recurrent expenditure
2. Customs authority transferred birr 50,000 of the collected revenue to MOFED.
3. Ministry of health transferred birr 30,000 to customs authority for the payment of
customs duty.
4. Region X transferred birr 25,000 from BA #1 to support a project under region X which
is maintained under BA#2
NON-CASH TRANSFERS
Non-Cash transfers are used to record a transfer when cash does not actually move. The
authorization for a non-cash transfer usually is a letter from MOFED. The source document for
non-cash transfers is a Journal Voucher; Non-cash transfers are reported monthly. (MOFED and
DSA Project manual, December 2002).
Example: Recording non- Cash Transfers
The activity is meant to give you knowledge on how to record non-cash transfers between
MOFED, and different public bodies.
Assume Ministry of Health (MOH) requests MOFED to pay customs duty amounting to Birr
200,000 on its behalf to the customs Authority (CA) for medical equipment’s from its capital
expenditure budget and further assuming that you are the accountant in these institutions.
You are required to show how you can record this in the transaction register of
MOFED, customs authority and MOH. Note that all the transactions are recorded under other
column.
Number 4105
Dr Cr Dr Cr
1 Transfer to MOH - Customs duty - 4054 200,000
Transfer from CA-Customs duty - 4055 200,000
5
Transaction Register of Ministry of Health:
Number 4103
Dr Cr Dr Cr
1 Purchase of motor 02 6311 200,000
vehicles
Transfer from MOFED- - 4054 200,000
Customs duty
Transaction Register of Customs Authority:

Number 4103
Dr Cr Dr Cr
1 Transfer to MOFED - 4055 200,000
Duty on Motor vehicles - 1301 200,000
COLLECTION OF REVEVUE/ ASSISTANCE/LOAN

Public bodies are authorized to collect revenue on behalf of the FGE. In addition, Public Bodies
may receive funds for assistance and loan directly from donors and lenders. Receipts are
collected in the form of currency, checks and direct bank transfers. The source document for
collection of revenue is a receipt voucher. Revenue /assistance/ loan receipts are reported
monthly. Revenue /assistance/ loan account codes are found in the budget reform design manual.
These codes are subject to change each year. Receipts are recorded as a debit to cash at Bank
4103 and a credit to the appropriate revenue /assistance/ loan account code (MOFED and DSA
Project manual, January, 2002).
Example: Recording Receipt of Revenue/Assistance/ Loan
Assume you are the accountant of Ministry of foreign affairs and that you collected birr 15,000
in fees for visas. How can you record the cash you collected in the Ministry of Foreign Affairs'
transaction register? See the answer below.
Transaction Register of Ministry of Foreign Affairs:

No Description TB Account Others Cash at Bank
Number 4103
Dr Cr Dr Cr
1 Revenue - 1411 15,000 15,000
Transfer of collections Directly to MOFED
In some public bodies, revenue collectors make deposit directly to a MOFED bank account. It is
important that the collector adequately identify the public body for which the deposit is made.
When MOFED receives the bank advice, MOFED records a debit to cash in Bank 4105 and a
credit to transfer account code 4009. When the public body receives the Receipt voucher from
revenue collectors, the public body records a debit to transfer account code 4009 and a credit to
the appropriate revenue account code (MOFED and DSA Project, December, 2002).
Example: MOFED receives a deposit from Internal Revenue for Birr 60,000. The deposit is
from the collection of agricultural income tax.
6
Number 4105
Dr Cr Dr Cr
1 Transfer from IR - 4009 60,000 60,000
Transaction Register of Internal Revenue:

Number 4103
Dr Cr Dr Cr
1 Transfer 4009 40,000
Agricultural Revenue 1107 40,000
PAYMENT OF EXPENDITURES
Public bodies are authorized to make cash expenditures from funds budgeted for that purpose.
Cash expenditures are made using currency, checks and direct bank transfers. Cash expenditures
made for different units for different purpose are discussed below.
The source document for cash expenditures made using other than currency is a Bank payment
voucher. Expenditures from the recurrent budget and capital budget are reported monthly.
Expenditure account codes are found in the chart of accounts. These codes are Subject to change
each year. Cash expenditures are recorded as a debit to the appropriate expenditure account code
and a credit to cash at bank 4103.The public body should maintain a subsidiary ledger for each
expenditure account code if the public body handles more than one budgetary institution. Each
budgetary institution should have an account in the subsidiary ledger (MOFED and DSA Project
manual, December 2002).
Payments to Regions/Transfer Recipients by MOFED
Payments by MOFED to regions and transfer recipients (Functional classification 4000 - 4099,
are budgeted expenditures of the federal government). When MOFED makes these payments,
MOFED records the expenditure in the federal Transaction Register.
Example: Recoding payments to Regions/Transfer Recipients by MOFED
The intention here is to make you acquainted with the skills of recording regional subsidies on
MOFEDs' transaction register. Assume a subsidy payment of Birr 200,000 is made to a region by
MOFED where you are an accountant.
Students, you are required to record the payment made by MOFED on the transaction register of
MOFED. See the answers below.
The entries you made should be as follows:
Transaction Register of MOFED
Number
Dr Cr Dr Cr
1 Region subsidy 6411 200,000 200,000
** Public bodies simply debit cash at bank 4103 and credit appropriate transfer code.
Check Payments by Accountants
Note that only accountants are allowed to make payments using checks.
Example: Assume that an accountant pays by check an amount of Birr 45,000 for office
supplies.
7
Number 4103
Dr Cr Dr Cr
1 Office supplies paid in 6212 45,000 45,000
cash
Cash payment by MOFED on Behalf of Public Bodies

MOFED can make cash payments on behalf of a public body. The transaction begins with a
letter from the public Body to MOFED requesting that the payment be made on its behalf. If
MOFED approves the payment, the cash is paid by MOFED, the public body is notified of the
payment by model 35, and the public body records the expenditure. The source document for the
transaction is a payment voucher at MOFED and a journal voucher at the public body.
Cash payments made by MOFED on behalf of Public Bodies are recorded:
By MOFED, as a debit to the appropriate transfer code and a credit to Cash at Bank 4105, and
by the public Body, as a debit to the appropriate expenditure code and a credit to the
appropriate transfer code.
Example: The Ministry of Health (MOH) requests MOFED to pay for a motor vehicle on its
behalf amounting to Birr 300,000 from its capital expenditure budget.

Number 4105
Dr Cr Dr Cr
1 Transfer to MOH - 4004 300,000 300,000
Transaction Register of Ministry of Health:

Number 4103
Dr Cr Dr Cr
1 Purchase of motor vehicles 02 6311 300,000
Transfer from MOFED - 4004 300,000
CASH EXPENDITURE: LETTER OF CREDIT

A Public Body may need to open a Letter of Credit as part of an international purchase
agreement. Opening a letter of credit means putting cash in a restricted bank account dedicated to
payment of the purchase price when appropriate conditions are met. According to MOFED and
DSA Project, there are two processes for opening a letter of credit:
I. If the letter of credit is for Birr 50,000 or less, the public body can open the letter of credit.
II. If the letter of credit is for more than Birr 50,000, the public body must request that
MOFED open the letter of credit.
Letter of Credit Opened by Public Body
When a public Body opens a Letter of Credit, cash is paid, using a Bank payment Voucher, from
the bank account of the public Body to a restricted bank account at the national bank of Ethiopia.
In the transaction register for the public body's bank account, expenditure is recorded. The public
body uses another transaction register for the restricted bank account.
8
The public body must combine the monthly report of the restricted account with the monthly
report of the regular bank account for reporting to MOFED.
Example: The ministry of Health (MOH) establishes a restricted bank account to open a letter of
credit for the purchase of medical supplies valued at birr 35,000.
Transaction Register - Regular Bank Account of Ministry of Health:
Number 4103
Dr Cr Dr Cr
1 Purchase of medical supplies 02 6214 35,000 35,000
Transaction Register - Restricted Bank Account of Ministry of Health:

Number 4103
Dr Cr Dr Cr
1 Letter of credit #xxxx - 5500 35,000 35,000
Letter of Credit Opened by MOFED on behalf of Public Body

If the letter of credit is more than 50,000 birr, a Public Body requests MOFED to open a letter of
credit on its behalf. Then MOFED will perform the following:
 Transfers cash to restricted bank account at national bank of Ethiopia on behalf of the
public body,
 Records a cash transfer to the public body, and
 Notifies the public body of the transaction.
Then the public body will:
 Records the cash transfer as expenditure in the transaction Register for the public
Body's bank account, and
 Records the Letter of Credit in another Transaction Register for the restricted bank
account.
Note that the public Body must combine the monthly report of the restricted account with the
monthly report of the regular bank account for reporting to MOFED.
Example: The Ministry of Agriculture (MOA) requests MOFED to open a letter of credit on its
behalf amounting to Birr 600,000 for motor vehicles from its capital expenditure budget.
Transaction Register: MOFED
No Description TB Account No Other Cash at bank 4105
Dr Cr Dr Cr
1 Transfer to MOH - 4054 600,000 600,000
Transaction Register bank account MOA:

Number 4103
9
Dr Cr Dr Cr
1 Purchase of Motor vehicle 02 6311 600,000
2 Transfer from MOFED - 4054 600,000
Transaction Register - Restricted Bank Account of Ministry of Agriculture:

Number 4103
Dr Cr Dr Cr
1 Letter of Credit - 5531 600,00 600,000
#xxxx 0
Check your progress!

Record the following transactions under responsible public bodies.
1. PB X collected an internal revenue of birr 48,000 and directly made a deposit to
MOFED.
2. MOFED paid a regional subsidy of birr 120,000 to region 4.
3. Ministry of health opened a letter of credit by the amount of 40,000 to purchase medical
equipment’s.
4. Ministry of science and technology opened a letter of credit by the amount of 550,000 for
the purchase of laboratory materials.
Cash Payment by Public Body to Region

Occasionally public Bodies make cash payments to regions. Usually sector line ministry receives
funds from a donor through channel 2 (other than budget). Some of the funds are intended for
sector bureaus in the regions. The sector line ministry acts as a treasury department by
distributing the cash to the region sector bureaus directly.
All payments to the regions from the federal level are budgeted as part of the region's subsidy (a
rare exception is discussed below). When a public body pays cash to regions, the payment is part
of the regions subsidy. The public body should record the payment as a subsidy payment.
Example: The ministry of Education (MOH) sends Birr 80,000 to a region as part of a sector
development plan.
Transaction Register - Ministry of Education:
Number 4103
Dr Cr Dr Cr
1 Region Subsidy - 6411 80,000 80,000
CASH EXPENDITURE: PAYMENTS REQUIRING WITHHOLDING OF TAX

The tax authority requires that a tax must be paid on specified purchases over a certain amount.
The purchaser collects the tax as a withholding from the purchase price. The threshold amount
and the tax rate may vary each year. The tax is paid to the appropriate authority, federal or
regional government, depending on the location of the supplier.
The supplier can reclaim the withholding tax. The tax authority creates a special tax receipt that
should be issued to the supplier when the tax is withheld. This receipt is not an accounting
document and should not be referenced in any accounting record. If a regional tax authority has
not issued a special tax receipt, the federal special tax receipt should be used .The withholding
10
tax does not reduce the cost of the goods to the public body. The withholding tax is a reduction
to the payment made to the supplier. The payment is made to the appropriated government
instead.
When a purchase is made that requires the withholding of tax, a bank payment voucher is
prepared that indicates, in the space provided for accounting use only (MOFED and DSA project
manual, December 2002).
The journal entry would be: debiting the expenditure account code for the full purchase price and
the following:
 If the tax is federal, withholding tax revenue code 1103 or 1104 (depending on whether the
supplier is an individual or a corporation) with a credit for the amount of the tax. The only
exception is if the payment is made with retained revenue. If retained revenue is the source of
funds for the payment, payable account code 5028 (other payable within gov’t) is credited for
the amount of the tax.
 If the tax is regional, payable account code 5026 with a credit for the amount of the tax.
Then Cash at bank 4,103 with a credit for the actual amount paid to the supplier.
Cash Payment Requiring Withholding of Tax: Federal Tax
When federal tax is withheld from a purchase, the tax is recorded as revenue immediately
subsequently; an amount of cash equal to the tax is transferred to MOFED.
Example: A public body buys office supplies from a corporation for Birr 300,000 from its
recurrent expenditure budget - Birr 296,000 relates to the cost of the office supplies and Birr
4,000 is the withholding tax.
Transaction #1: Payment effected to supplier
Number 4103
Dr Cr Dr Cr
1 Office supplies 01 6212 300,000
Withholding tax revenue 1104 4,000 296,000
Transaction #2: Transfer to MOFED

Number 4103
Dr Cr Dr Cr
2 Transfer to MOFED 4009 4,000 4,000
Note that since the tax is a federal tax it will be directly transferred to MOFED.

Number 4105
Dr Cr Dr Cr
1 Transfer from PB 4009 4,000 4,000
Cash Payment Requiring Withholding of Tax: Regional Tax
When regional tax is withheld from a purchase, the tax is recorded as a payable to the region.
Subsequently, an amount of cash equal to the tax that is transferred to MOFED. MOFED pays
the tax amount to the region. A subsidiary ledger should be maintained for payable to region
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account code 5026 if tax is collected for more than one region. Each region should be a separate
account in the subsidiary ledger.
Example: A public body buys office supplies for Birr 120,000 from its recurrent expenditure
budget - Birr 117,600 relates to the cost of the office supplies and Birr 2,400 is the regional
withholding tax.
Transaction #1: Payment effected to supplier

Number 4103
Dr Cr Dr Cr
1 Office Supplies 01 6212 120,000
Tax payable to Region 5026 2,40 117,600
0
Transaction #2: Transfer to MOFED
Number 4103
Dr Cr Dr Cr
2 Payable to MOFED 5026 2,400 2,400
Number 4105
Dr Cr Dr Cr
1 Tax payable to region 5026 2,400 2,400
Transaction #3: MOFED pays tax to region
Number 4105
Dr Cr Dr Cr
2 Payable to region 5026 2,400 2,400

A public body acquired office supplies for birr 250,000 and the transaction requires withholding
tax of 2%. Assuming the tax is federal and regional tax; record the necessary transactions.
CASH EXPENDITURE: CONSTRUCTION PROJECTS

According to MOFED and DSA Project, December 2002, long-term construction projects
involve complicated financial arrangements. Several accounting entries are necessary over the
life of the project. In general, when a construction contract is signed, there are several steps in
the payment process, at each step, an accounting entry is required. The general steps are:
Payment of an advance: Usually the contract calls for an advance payment to the contractor. The
advance payment is proportionately deducted from future payments to the contractor.
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Progress payments based on payment certificates: Usually the contract calls for partial payment
of the total contract price as the construction reaches agreed-upon percentages of completion. A
payment certificate is evidence that the agreed-upon completion percentage is reached.
Payment of the retention: Usually a percentage of the payment is retained and not paid until
final acceptance of the completed construction.
Example: Assume the following:
A contract is signed to construct a building for 4,000,000 Birr. Terms of contract are:
 Initial advance of 20% = 800,000 Birr
 Advance adjusted proportionately with each payment certificate approval.
 Retention of 10% withheld from each payment certificate & paid after final
approval.
Steps in payment are:
• Payment of 20% advance.
• Payment certificate when 40% complete.
Transaction #1: payment of 20% advance:
Accountant prepares a payment voucher and a check for 800,000 Birr that will be Debited to
4251 & Credited to 4103.

Number 4103
Dr Cr Dr Cr
1 Advance to contractor 4251 800,000 800,000
Transaction #2: payment certificate when 40% complete.

Accountant prepares a check for 1,120,000 Birr as follows:
1,600,000 payment certificate request
320,000 adjustment to advance (40% of adv)
160,000 retention.
Accountant prepares payment Voucher as follows:
Debit to 6323 for 1,600,000
Credit to 4251 for 320,000
Credit to 4103 for 1,120,000
No Description TB Account No Others Cash at bank 4103
Dr Cr Dr Cr
2 Construction - 02 6323 1,600,000
Building
Advance to 4251 320,000
contractor
Retention 5061 160,000 1,120,000
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Here the percentage of completion is 40% because up to the second transaction it was 40%
complete. Now on this transaction when it says the construction is 80% complete, it is to mean
the other 40% is completed. Therefore, the transaction and the calculation will be the same with
the above transaction #2.
Accountant prepares a check for 1,120,000 Birr as follows:

1,600,000 payment certificate request
320,000 adjustment to advance (40% of adv)
160,000 retention.
Debit to 6323 for 1,600,000
Credit to 4103 for 1,120,000

Number 4103
Dr Cr Dr Cr
4 Construction – 02 6323 1,600,000
Building
Advance to contractor 4251 320,000
Retention on Contract 5061 160,000 1,120,000

Accountant prepares a check for 560,000 Birr only for the remaining 20% as follows:
800,000 payment certificate request
160,000 adjustment to advance (20% of adv.)
80,000 retention
Debit to 6323 for 800,000

Number 4103
Dr Cr Dr Cr
4 Construction – 02 6323 800,000
Building
Advance to contractor 4251 160,00
0
Retention on Contract 5061 80,000 560,000
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Transaction #5: Payment of retention after final approval of project:
The retained payment will be paid to the contractor after the final inspection is made. Assuming
the construction is performed as per the plan; the accountant prepares a check for 400,000 Birr.
Accountant prepares payment voucher for 400,000 Birr that will be Debited to 5061 & Credited
to 4103

Number 4103
Dr Cr Dr Cr
5 Retention on contract 5061 400,000 400,000

1. Assume the following case: A contract is signed to construct a building for 12,000,000 Birr.
Terms of contract are:
 Initial advance of 30%
 Advance adjusted proportionately with each payment certificate approval.
 Retention of 5% withheld from each payment certificate & paid after final
approval.
Record the journal entries in the following steps of payment:
A. Payment of 30% advance.
B. Payment certificate when 30% complete.

C. Payment certificate when 70% complete.
D. Payment certificate when 100% complete.
E. Assuming the final inspection is made and no error is found, record the payment of
retention to contractor.
CASH EXPENDITURE: SALARY

It is well known that Public Bodies pay salaries to employees every month. This section
describes the accounting for: Payment of salary, unpaid salary and unearned salary
Payment of Salary
The salary payment transaction is complex. The public body must record the gross salary amount
and government's portion of pension as expenditure to maintain budget control, but only the net
salary amount is transferred to, and paid by the public body.
After the salary request is approved, MOFED transfers the net salary amount to the public body
and the total pension amount, employee and government contribution, to the pension Authority.
Although cash for pension is transferred directly to the pension authority, MOFED records the
cash transfer as if the cash was transferred to the public body. At MOFED, two transfer entries to
the public body are recorded in the transaction register:
 A debit to transfer code 4001 and a credit to cash at bank 4105 for the net salary amount.
 A debit to transfer code 4001 and a credit to cash at bank 4105 for the total pension
amount sent to the pension Authority.
Each transfer amount is reported to the public Body separately on Ge/Be/We 12/1 with Model 33.
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When the public Body receives Ge/Be/We 12/1, the public Body prepares the following:
 A receipt voucher for the total amount of cash received. The entry is a debit to cash at
bank 4103, a debit to pension payable account code 5003 for the amount of cash paid to
the pension Authority, and a credit to transfer code 4001.
 A journal voucher to record salary and pension expense. The entry is a debit to salary
expense code 6111 (6112 for military) for the gross salary amount, a debit to pension
expense code 6131 (6132 for military) for the government’s portion of the pension
contribution, a credit to salary payable code 5004 for the net salary amount, a credit to
pension payable code 5003 for the amount of each paid to the pension Authority, a credit to
income tax code 1101 for tax withheld from salary, and a credit to any other withholding
amounts.
Example: Recording Payment of Salary
Assume the Ministry of Agriculture (MOA) requests salary for the month of Sene 2009 with the
following details and also assume that you are the accountant in MOA and MOFED.
Gross (basic) salary 40,000 Deduction: salary advance 1,200
Pension expense - 9% =3,600 Penalty for absenteeism 500
Employee pension - 7% = 2,800 Net Salary payable 31,500
Income tax 4,000
How can you record on the transaction registers of both MOFED and MOA? See the answer
below.
Number 4105
Dr Cr Dr Cr
1 Transfer to 4001 31,500 31,500
MOA
2 Transfer to PB 4001 6,400 6,400
Transaction Register of MOA:

Number 4103
Dr Cr Dr Cr
1 Transfer from PB 4001 37,900 31,500
Pension payable 5003 6,400
2 Salary Expense 01 6111 40,000

Pension Expense 01 6131 3,600
Salary payable 5004 31,500
Income Tax 1101 4,000
Staff Advance 4203 1,200
Fines 1485 500
Pension Payable 5003 6,400
16
Unpaid Salary
Net salary amount is recorded as salary payable when salary expense is recorded (see above).
When salary is paid, salary payable is debited for the amount paid. Any unpaid salary is the
amount remaining in the salary payable account code 5004 after salary is paid. When unpaid
salary is paid, the entry is a debit the salary payable code 5004 and a credit to cash. After salary
is paid, a subsidiary ledger for salary payable account should be maintained.
Unearned Salary
Occasionally, salary is requested and received, but the employee is not entitled to the entire
salary amount received. For some reason, the employee quits working for the public Body during
the month. When this happens, the salary entry explained above must be reversed for that
employee, and the pension transfer must be corrected. In addition, MOFED must be notified so
that the pension transfer and subsequent months’ salary can be adjusted.
Example: Suppose an employee in the Ministry of Agriculture worked only half of July instead
of the whole month. This is discovered after the salary expense entry in the example above. The
amounts of overpayment are:
Gross Salary 1000 Income tax 70
Pension expense - 9% 90 Salary Payable 860
Employee pension - 7% 70
Transaction #1: Reverse salary expense
Number 4103
Dr Cr Dr Cr
1 Salary Expense 01 6111 1000
Pension Expense 01 6131 90
Salary Payable 5004 860
Income Tax 1101 70
Pension Payable 5003 160
Transaction #2: Adjust Pension transfer


Number 4103
Dr Cr Dr Cr
2 Transfer - Salary 4001 160
Pension payable 5003 160

Number 4105
Dr Cr Dr Cr
1 Advance to pension 4210 160
2 Transfer - Salary 4001 160
17
Transaction #3: Next month's salary transfer
The Ministry of Agriculture (MOA) requests salary for the month of August 2001 with the
following details:
Gross salary 38,000 Income tax 3,800
Pension expense - 9% 3,420 Deduction: salary advance 1,200
Employee pension -7% 2,660 Net Salary payable 30,340

Number 4103
Dr Cr Dr Cr
1 Transfer to PB 4001 30,340 30,340
2 Transfer to PB 4001 6,080
Advance to Pension 4210 160 5,920

Number 4103
Dr Cr Dr Cr
1 Transfer from PB 4001 30,340 36,260
Pension payable 5003 5,920
2 Salary Expense 01 6111 38,000

Pension Expense 01 6131 3,420
Salary payable 5004 30,340
Income Tax 1101 3,800
Staff Advance 4203 1200
Pension Payable 5003 6,080
RECEIVABLES AND PAYABLES

A receivable is an amount owed to a public body that does not have terms of repayment detailed
in a signed agreement. Receivables usually are created when:
 Cash is transferred but must be returned unless certain conditions are met.
 Advances are given with the understanding that the amount must be repaid or otherwise
accounted for, or goods or services must be delivered.
A payable is amount owed by a public body that is due within one year. Payables usually are
created when:
 Cash is received but must be returned unless certain conditions are met.
 Goods or services are delivered but payment is not yet made.
All receivable and payable account balances are reported monthly. All receivable and payable
accounts should have subsidiary ledgers. The subsidiary ledger should have an account for each
individual.
Receivables and Payables: With MOFED
In some situations, MOFED advances cash to public Bodies. MOFED records the advance as a
receivable, and the public Body records the advance as a payable. Cash movements between
18
MOFED and a public Body are recorded as a receivable and a payable, rather than a transfer, if
the funds were not requested by Ge/Be/We 11/xx.
Example Prior to receipt of its budget notification, a public Body requests funds in June to pay
recurrent expenditures. MOFED sends Birr 6,000

No Description TB Account Others Cash at
Number bank 4105
Dr Cr Dr Cr
1 Advance for Recurrent 4206 6,00 6,000
0

Number 4103
Dr Cr Dr Cr
1 Due to MOFED 5024 6,000 6,000
When the public Body receives its budget notification, a Ge/Be/We 11/2 is sent to MOFED for
Birr 20,000. This requests includes the 6,000 Birr received as an advance. MOFED approves the
request, reduces the cash transfer by 6,000 Birr, and transfers Birr 14,000 in cash.

Number 4105
Dr Cr Dr Cr
1 Advance Recurrent 4206 6,000
Transfer - Recurrent 4002 20,000 14,000

Number 4103
Dr Cr Dr Cr
1 Due to MOFED 5024 6,000
Transfer – Recurrent 4002 20,000 14,000
Receivables and Payables: with Employees

In discussing the receivables and payables with employees, we are going to discuss three
situations. This are:
 Long - term salary advances.
 Amounts due from employees as reimbursement for use of government property.
 Handling of funds held by a public body on behalf of an employee
Long - Term Salary Advance
An employee can receive a long-term advance on salary (longer than one month) under
appropriate conditions. When a long-term salary advance is processed, interest is charged and
19
withheld from the advance. The public body is responsible for repayment of salary advances to
its employees.
Example: A long -term salary advance of Birr 4,000 is requested and approved. MOFED
transfers the net amount to the public body after deducting the applicable interest on the advance
amounting to Birr 400.
Transaction #1: cash transfer from MOFED

Number 4105
Dr Cr Dr Cr
1 Transfer 4005 3,600 3,600
Number 4103
Dr Cr Dr Cr
1 Transfer 4005 3,600 3,600
Transaction #2: Payment of Advance

Number 4103
Dr Cr Dr Cr
1 Staff Advance 4203 4,000
Interest 1465 400 3,600
Reimbursed Payments
In certain circumstances, employees make personal use of government property. When this
occurs, the public body must charge the employee and collect payment.
Example: A Public body receives a telephone bill for Birr 300. Included in the bill are personal
telephones calls made by an employee.
Treatment #1: The Public body knows, at the time the telephone bill is paid, that the amount of
the personal telephone calls totals Birr 100.
Number 4103
Dr Cr Dr Cr
When the telephone bill is paid:
1 Telephone Expense 01 6258 200
Staff Advance 4203 100 300
When employee pays:
2 Staff Advance 4203 100 100
Treatment #2: The public body does not know, at the time the telephone bill is paid, the amount
of the personal telephone calls.
20
Number
Dr Cr Dr Cr
When the telephone bill is paid:
1 Telephone Expense 01 6258 300 300
When employee pays:
2 Telephone Expense 01 6258 100 100
Funds Held on Employee's Behalf
In certain circumstances, funds are received by a public body and are intended for the use of an
employee. These funds are not budgeted by the FGE. The public body is simply a conduit used
for assigning the funds from a donor to an employee. According to MOFED and DSA Project,
December 2002, the public body should only handle funds that are used by the employee to
further the objectives of the public body, and never give the employee access to other funds held
in the same bank account (do not allow the employee access to checks).
Movements of funds held by public bodies on behalf of an employee are not recorded as revenue
or expenditure for the government. The funds are due to the employee while in the custody of the
public body.
Example: A donor deposits Birr 30,000 in the bank account of a public body to support the
research of an employee.
Transaction #1: Funds are deposited

Number 4103
Dr Cr Dr Cr
1 Due to staff 5021 30,000 30,000
Transaction #2: The employee receives 5,000 Birr from the fund

Number 4103
Dr Cr Dr Cr
2 Due to staff 5021 5,000 5,000
Receivables and Payables: Employee Transferred with Salary Advance

Employees may be transferred from one public body to another; the transferred employee may
have a long-term salary advance with an outstanding balance. The balance for the employee in
the advance account must be transferred with the employee from the accounting records of the
former employer to the records of the new employer. The document is a letter of transfer that
details the balance in the employee’s advance account. Each public body prepares a journal
voucher based on the letter.
Example: An employee is transferred from public Body #1 to public Body #2. The employee has
a long-term advance with an outstanding balance of Birr 8,000.
21
Transaction Register of Public Body #1:
Number 4103
Dr Cr Dr Cr
Net Asset/Equity 5601 8,000
Advance to Staff 4203 8,000
Transaction Register of Public Body #2:

Number 4103
Dr Cr Dr Cr
Advance to Staff 4203 8,000
Net Asset/Equity 5601 8,000
Receivables and Payables: With Suppliers
In the process of procurement, the payment of cash and the receipt of goods and services do not
occur simultaneously. When there is a timing difference, a receivable or a payable is created.
Receivables from Suppliers
Receivables are created when a supplier is paid for goods or services prior to their delivery. In
this case, the supplier owes to the public body goods and services equal to the cash provided, or
Return of the cash.
Example: A public Body pays an advance of Birr 2,500 to a supplier for procurement of office
supplies. The supplier delivers the office supplies after 30 days and the actual invoice amounts to
Birr 7,500.
Transaction #1: payment of advance.
Number 4103
Dr Cr Dr Cr
1 Advance to - 4253 2,500 2,500
Supplier
Transaction #2: Delivery of supplies.
Number 4103
Dr Cr Dr Cr
Advance to Supplier - 4253 2,500 5,000
Payables to suppliers
Payables are created when a supplier delivers goods or services prior to receiving payment. In
this case, the public body owes to the supplier payment for the cost of the goods and services, or
Return of the goods.
Example: A public body receives office supplies amounting to Birr 5000 on credit from a
supplier. Payment is made after 30 days.
Transaction #1: Receipt of office supplies
22
Number 4103
Dr Cr Dr Cr
Sundry creditors 5002 5,000
Transaction #2: Payment is made.

Number 4103
Dr Cr Dr Cr
1 Sundry Creditors - 5002 5,000 5,000
Grace Period Payables

The financial Law permits public Bodies to expend funds from their prior year's recurrent and
capital budgets during the grace period for goods and services delivered before the end of the
fiscal year. Amounts due to suppliers on the last day of the fiscal year that are paid during the
grace period from the prior year's budget, are called grace period payables (account code 5001).
Transfers of funds from MOFED to public Bodies, that are used to pay grace period payables,
are given account code 4007. Grace period payables are recorded in the next fiscal year
(MOFED and DSA Project manual, December 2002).
Example: In the first 30 days of the fiscal year, a public body pays Birr 10,000 for office
supplies that were recorded as grace period payables from the prior year's capital expenditure.
Transaction #1: Provision for grace period payables last year.
Last Year's Transaction Register of Public Body:
Number 4105
Dr Cr Dr Cr
1 Office supplies 02 6212 10,000
Grace period payables 5001 10,00
0
Transaction #2: Transfer of funds for grace period payables this year.
This year's Transaction Register MOFED:
Number 4103
Dr Cr Dr Cr
1 Transfer - GPP - 4007 10,000 10,000
This year's Transaction Register of Public Body:
Number 4103
Dr Cr Dr Cr
1 Transfer - GPP - 4007 10,000 10,000
23
Transaction #3: Payment of grace period payables this year.
This year's Transaction Register of Public Body:
Number 4103
Dr Cr Dr Cr
1 Grace period payables 5001 10,000 10,000
Receivable and Payables: Deposits

Some public bodies collect and return deposits. Deposits are not budgeted. The receipt and return
of deposits may be documented using special forms (Models 85 and 86 or Models 185 and 186).
Deposits may be kept in the safe, in the main bank account of the public body, or in a separate
bank account.
A deposit is a payable for a public body. A public body must return the deposit upon demand of
the depositor. A public body should not spend deposit funds. When the deposit is returned, the
payable is cancelled.
Example: Receipt and Return of Deposit

A public body collects a deposit of Birr 50,000 as bid security. The bid is unsuccessful and the
deposit is returned at a later date.
Transaction #1: Receipt of Deposit.
Number 4103
Dr Cr Dr Cr
1 Bid security Deposit - 5054 50,000 50,000
Transaction #2: Refund of Deposit.

Number 4103
Dr Cr Dr Cr
1 Bid Security Deposit - 5054 50,000 50,000
AID IN KIND
Aid in kind is goods or services (such as technical assistance) provided to a public body by
donors. Aid in kind is received when goods are received or services are rendered, and no
payment is expected. Aid in kind represents two transactions simultaneously: the receipt of
assistance and the expenditure of assistance. Aid in kind should be budgeted and recorded as
both revenue and expenditure. The expenditure should be recorded in the subsidiary ledger for
the budgeted project, using the 4-digit source of funding code assigned to the project (MOFED
and DSA Project manual, December 2002).
24
Example: Recording Aid in Kind
Assume aid in kind is received by a public body in which you are working as an accountant in
the form of a motor vehicle with a cost of Birr 2,000,000 from USAID under the capital
expenditure budget for project code 3456.
Transaction Register of the public Body:
Number 4103
Dr Cr Dr Cr
1 Motor vehicles 02 6311 2,000,00
0
Assistance 2084 2,000,000
All aid in kind entries are recorded in local currency only.
At the end of the fiscal year all the temporary accounts like revenue, expenditure and transfers
will be closed to net asset account to make them begin the new fiscal year with a zero balance.
MODEL QUESTIONS
Record the following transactions under responsible public body.
1. MOFED transferred birr 700,000 to ministry of agriculture as a recurrent expenditure
budget for the fiscal year.
2. Ministry of health transferred birr 12,000 to customs authority for customs duty of the
purchased equipment’s.
3. Ministry of foreign affairs collected birr 45,000 from VISA application and transferred to
MOFED.
4. Public body #1 transferred birr 90,000 to public body #2
5. Ministry of agriculture opened a letter of credit for birr 40,000 to purchase a machinery.
6. Ministry of health requested MOFED to open a letter of credit in the amount of birr
250,000.
7. Assume the Ministry of science and technology requests salary for the month of July
2007 with the following details and also assume that you are the accountant in ministry
and MOFED.
Gross (basic) salary 120,000 Deduction: salary advance 1,500
Pension expense - 9%= ? Penalty for absenteeism 800
Employee pension - 7% = ? Net Salary payable 31,500
Income tax 6,000
Record the transfer of cash by MOFED and payment of salary.
8. In the first 30 days of the fiscal year, a public body pays Birr 12,000 for office supplies
that were recorded as grace period payables from the prior year's capital expenditure.
Record the necessary journal entry on the last year’s and current year’s transaction
register under necessary public bodies.
9. A public Body pays an advance of Birr 2,000 to a supplier for procurement of office
supplies. The supplier delivers the office supplies after 60 days and the actual invoice
amounts to Birr 10,000.
Record the payment of advance and receipt of supplies.
25
10. Assume aid in kind is received by a public body in which you are working as an
accountant in the form of a laboratory equipment’s with a cost of Birr 1,000,000 from
UNDP under the capital expenditure budget for project code 1234.
Record the receipt of the goods under a public body.
UNIT 4: MONTHLY REPORTS
INTRODUCTION
According to MOFED and DSA Project manual, the only monthly reports verified by Ministry of
Finance and Economic Development is the transfer report and the Trial Balance. The transfer
report is verified by Ministry of Finance and Economic Development to ensure that all
disbursements to an accounting unit by Ministry of Finance and Economic Development and all
disbursements from an accounting unit to MOFED are accounted for within the accounting
system to enhance control over cash transfers. The Trial Balance is verified by MOFED to
ensure that the total debits and credits are equal and that general Ledgers are balanced. Also,
MOFED verify the cash balance for the domestic source of finance from the trial Balance to
enhance cash management practices at federal level.
All other monthly reports that are submitted to Ministry of Finance and Economic Development
serve as input documents to consolidate reports and produce financial statements at the Federal
Level. The Inspection Department and the Office of The Auditor General verify these reports.
All monthly reports are prepared in two copies. The original copy is sent to Ministry of
Finance and Economic Development and the second copy is retained as a permanent record at
the reporting entity.
REVENUE/ASSISTANCE/LOAN REPORT
The Revenue/Assistance/Loan report provides information on the year-to-date revenues of an
accounting unit from each source of finance. The purpose of the revenue/Assistance/Loan Report
is to facilitate consolidation of the actual revenues, assistance and loan collected by the FGE
and Regional State to facilitate comparison of budgeted revenues to actual revenues by account
category (MOFED and DSA Project manual, January, 2002).
The Accountant prepares a revenue/Assistance/Loan report for the accounting unit. The source
document to prepare the revenue/Assistance/Loan report is the general Ledger. Each item of
revenue, assistance or loan is identified by account code. The amount from the balance column
in the general ledger card is transcribed into the revenue/assistance/Loan report. The grand totals
from each revenue/Assistance/Loan report are carried forward to the trial balance. Balances in
the Revenue/Assistance/Loan Report are normally credits. Each accounting Unit prepares one
revenue/assistance/Loan Report as indicated in figure 4.1 below.
26
Figure 4.1: Revenue/Assistance/Loan report
Me/He 21
Month__________
Name of Public Body:________________________ code: _______
Name of Program:___________________________ code: _______
Name of Sub Agency:________________________ code: _______
Name of Sub Program: ________________________code: _______
Name of Project: _____________________________code: _______
Bank Account Number:_______________________
Account YEAR-TO-DATE
Code Account description Revenue
Debit Credit
1101 Tax on wages and salaries
1465 Interest on loans to government employees
1485 Other miscellaneous revenue
Total (To Trial Balance)
_____________________________
Prepared by Name and Signature
(Source: MOFED AND DSA Project manual, December 2002)
Example: Preparing revenue/assistance/Loan Report

You are provided with the following general ledger balances as at May 31, 2009 for Haramaya
University, College of Continuing and Distance Education with budget category
311/01/07/00/000/xxx and bank account 10000645839. Further, assume also that you are the
accountant of the college.
27
General Ledger
Account Code
Debit Credit
1101 8,750
1415 550
1429 2,000
1485 600
4001 58,550
4002 30,450
4005 10,000
4009 3,000
4055 7,000
4101 20,850
4103 3,600
4203 11,000
5004 20,000
6111 68,500
6131 4,000
6213 9,000
6217 16,000
6241 1,500
6257 1,400
6258 800
6259 400
Required: Based on the above data, you are required to prepare the monthly reports for the
month of Sene 30, 2009.
We will use the format stated in figure 4.1 to prepare revenue/assistance/loan report. Note that
only revenue, assistance and loan accounts are the only components of the report. We hope you
will identify by looking into their account codes. If you face any difficulty just refer the annex
attached to identify the accounts from others.
28
Revenue/Assistance/Loan report
Me/He 21
Month __May __
Name of Public Body:___HU-CCDE____________ code: __311_____
Name of Program:___________________________ code: ____01___
Name of Sub Agency:________________________ code: ___07____
Name of Sub Program: ________________________code: __00_____
Name of Project: _____________________________code: _000______
Bank Account Number:___10000645839____________________
Code Account description Revenue
Debit Credit
1101 Tax on wages and salaries 8,750
1415 Court fees 550
1429 Other fees and charges 2,000
1485 Other miscellaneous revenue 600
Total (To Trial Balance) 11,900
____________________________________
RECURRENT EXPENDITURES REPORT
It is known that there are two types of expenditures; recurrent and capital expenditures that will
be reported separately. The recurrent expenditure report provides information on the year-to-date
recurrent expenditures of each budgetary Institution managed by an accounting unit. The purpose
of the recurrent expenditure report is to facilitate consolidation of the actual recurrent
expenditures made by the FGE and regional state to facilitate comparison of budgeted
expenditure to actual expenditure. The Accountant prepares the recurrent expenditure report for
each BI. The source document to prepare the recurrent expenditure report is the subsidiary
ledger. The balance of each subsidiary ledger card is transcribed to the appropriate account code
or in the recurrent expenditure report. Balances in the recurrent expenditure Report are normally
debits. Each accounting unit prepares a recurrent expenditure Report for each BI that it manages
(MOFED and DSA Project manual, December 2002). The format of the report is indicated in
figure 4.2 below.
29
Figure 4.2: Recurrent Expenditure Report
Me/He 22
Month___________
Name of Sub Program:________________________code: _______
Name of Project:_____________________________code: _______
Source of Finance:____________________________ code: _______
Bank Account Number:___ ____________________
Code Account Description Expenditure
Debit Credit
________________________________
Prepared by Name an Signature
(Source: MOFED and DSA Project, December 2002)
30
Example: Preparing Recurrent Expenditure Report.
Based on the data given previously, prepare the Recurrent Expenditure report
Recurrent Expenditure Report

Me/He 22
Month: May
Name of Public Body:____HU-CCDE___________ code: __311_
Name of Program:___________________________ code: __01_____
Name of Sub Agency:________________________ code: __07_____
Name of Sub Program:________________________code: __00_____
Name of Project:_____________________________code: __000_____
Source of Finance:____________________________ code: _xxx______
Debit Credit
6111 Salary to permanent staff 68,000
6131 Gov’t contribution to perm. Staff-pension 4,000
6241 Maintenance and repair of vehicles 1,500
6257 Electricity charges 1,400
6213 Printing 9,000
6258 Telecommunication charges 800
6259 Water and other utilities 400
6217 Fuel and lubricants 16,000
_________________________________
Prepared by Name an Signature
CAPITAL EXPENDITURES REPORT
The capital expenditure report provides information on the year-to-date capital expenditures (like
for construction and acquisitions) of each BI managed by an accounting unit. The purpose of the
capital expenditure report is to facilitate consolidation of the actual capital expenditures made by
the FGE and state governments and to facilitate comparison of budgeted expenditure to actual
expenditure. The accountant prepares the capital expenditure report for each BI. The source
document to prepare the capital expenditure report is the subsidiary Ledger. The amount from
the balance column in each subsidiary Ledger card is transcribed to the appropriate account code
in the capital expenditure report. Balances in the capital expenditure report are normally debits,
31
which are similar to the capital expenditure. Each accounting unit prepares a capital expenditure
report for each BI that it manages. The format of the report is indicated below.
Figure 4.3: Capital Expenditure Report

Me/He 23
Month___________
Name of Project: _____________________________code: _______
Source of Finance:____________________________ code: _______
Debit Credit

___________________________
TRANSFERS REPORT
Transfer report delivers information of cash flow made between the accounting unit and
MOFED/State year-to-date and during the month. The transfer report consists of two parts:
Part 1: summarizes transfer account balances from the general Ledger.
Part 2: provides information on each monthly cash transfer between the accounting Unit
and Ministry of Finance and Economic Development.
The purpose of the transfer report is to serve as a control tool to verify cash transfers between
MOFED and an accounting unit and vice versa. The accountant prepares a transfer report for
each accounting unit. The source documents to prepare the Transfer Report are the General
Ledger Cards. Balances in the Transfer Report are debits or credits depending on the nature of
the transfer account. One Transfer report is prepared for each Accounting Unit (MOFED and
DSA Project, December, 2002)
Part 1 of the transfer report

The amount from the Balance Column in the General Ledger Card is transcribed into the transfer
report – Part-1 as indicated in figure 4.4. The grand totals from each Transfer report - Part 1 are
carried forward to the trial Balance.
See table on the next page to capture the format of transfer report part-1
32
Figure 4.4 Transfer Report - Part 1
Me/He 24 Month__________
Name of Project :_____________________________code: _______
Code Account Description Balance
Debit Credit
4001 Recurrent salary and allowances
4002 Recurrent operating expenditure
4003 Capital salary and allowances
4004 Capital expenditure
4005 Staff advances
4006 SSDP funds
4007 Grace period payables
4008 Between BI and/or Region
4009 Other cash transfers
4010 Within BI or MOFED
4051 Recurrent salary and allowances: non-cash
4052 Recurrent operating expenditure: non-cash
4053 Capital salary and allowances: non-cash
4054 Capital expenditure: non-cash
4055 Other non-cash transfers
___________________________
Prepared by name & signature
33
Example: Preparing Transfer Report Part I.
Based on the data given in previously for HU, CCDE, you are required to prepare the Transfer
Report Part I.
Transfer Report - Part 1
Me/He 24 Month:_May__
Name of Public Body:____HU,CCDE___________code: _311______
Name of Program:___________________________ code: ___01____
Name of Sub Program: ________________________code: _00______
Name of Project :_____________________________code: xxx______
Code Account Description Balance
Debit Credit
4001 Recurrent salary and allowances 58,550
4002 Recurrent operating expenditure 30,450
4003 Capital salary and allowances
4004 Capital expenditure
4005 Staff advances 10,000
4006 SSDP funds
4008 Between BI and/or Region
4009 Other cash transfers 3,000
4010 Within BI or MOFED
4051 Recurrent salary and allowances: non-cash
4052 Recurrent operating expenditure: non-cash
4055 Other non-cash transfers 7,000
______________________________
Part 2 of the transfer report
Each cash transfer during the month between the accounting unit and MOFED is listed
individually in Part 2 of the Transfer Report. The information required for Part 2 is transcribed
from the following cash transfer account Ledger cards:
4001: recurrent salary and allowances
4002: Recurrent operating expenditure
4003: capital salary and allowances
4004: capital expenditure
4005: Staff advances
4006: SSDP funds
34
4007: Grace period payables
Any other transfer code used during the month to transfer Funds to /from MOFED
Refer to figure 4.5 on the next page to understand the format of transfer report part-2. Columns
are identified by account code. The date and amount of each transaction recorded in the account
code's Ledger card during the month are transcribed in the corresponding sub-column of the
Transfer report. Each transaction is recorded in a separate row. Transfers received from
MOFED are credits and transfers of cash to MOFED are debits. Debit and credit sub-columns
are totaled and the total is recorded in the total row (MOFED and DSA Project, January 2002).
The difference between the totals in the debit and credit sub-columns for each account code is
calculated. If the total of debits is greater than the total of credits, the difference is recorded in
debit sub-column of the Net activity row. If the total of credits is greater than the total of debits,
the difference is recorded in credit sub-column of the Net activity row. The balance from the
account code's Ledger Card at the beginning of the month is recorded in the beginning of month
(BOM Balance) row. The amount in the Net Activity row is combined with the amount in the
BOM Balance row and recorded in the end of month (EOM Balance) row. The EOM Balance
must equal the balance in the account code's Ledger Card at the end of the month, which equals
the balance recorded for the account code in Part-1 of the Transfer Report. (MOFED and DSA
project)
35
Figure 4.5: Transfer Report - Part 2
Me/He 24
4001 4002 4003 4004 4005
D Dr. Cr. Dat Dr. Cr. Da Dr. Cr. Da Dr. Cr. Dr. Cr.
at e te te
e
date
Total
Net
activity
BOM
Balance
EOM
Balance
(Source: MOFED AND DSA Project, January 2002)
36
RECEIVABLES REPORT
The receivables report provides information on the year-to-date receivables owed to an

accounting unit. The purpose of the receivables report is to facilitate consolidation of the
actual receivables owed to the FGE. The accountant prepares a receivables Report for each
accounting unit. The source document to prepare the receivables report is the general ledger.
Each item of receivable is identified by account code. The amount from the balance column
in the general ledger card is transcribed into the receivables report. The grand totals from
each receivable report are carried forward to the trial balance. Balances in the receivables
report are normally debits. One receivables report is prepared for each accounting unit
(MOFED and DSA, Project manual, January 2002).
Figure 4.6 on the next page shows the format of receivable report.
Figure 4.6: Receivables Report

Me/He 25
Month__________
Name of Project :_____________________________code: _______
Code Account Description Receivables
Debit Credit
4201 Suspense
4202 Cash shortage
4203 Advance to staff
4204 Advance for SSDP
4205 Advance for staff from next year's budget
4206 Advance for recurrent expenditures from next year's budget
4207 Advance for capital expenditures from next year's budget
4208 Advance to regions
4209 Other advances to BI
4210 Other advances within government
4251 Advance to contractors
4252 Advance to consultants
4253 Advance to suppliers
4273 Individuals and private organizations
4274 Others
____________________________________
(Source: MOFED and DSA Project Manual, January 2002)
37
Example: Preparing Receivable Report.
Based on the data provided in for HU,CCDE, you are required to prepare receivable report.
Receivables Report
Me/He 25
Month__May_
Name of Public Body: _________HU,CCDE______ code: _311______
Name of Program:___________________________ code: ____01___
Name of Sub Program: ________________________code: __00_____
Name of Project :_____________________________code: __xxx_____
Code Account Description Receivables
Debit Credit
4203 Advance to staff 11,000
______________________
You have to note that when we want to prepare monthly reports, we have to check weather
that account/s is/are affected during the month by referring their source documents. For
example, from the data given, advance to staff is the only receivable account. Hence, even
though it is a single transaction during the month, we will report it in the above manner.
PAYABLES REPORT
The payables report provides information on the year-to-date payables owed by an

accounting unit. The purpose of the payables report is to facilitate consolidation of the actual
payables owed by the FGE or regional state. The accountant prepares a payables report for
the accounting unit. The source document to prepare the payables report is the general
ledger. Each payable item is identified by account code and the amount from the balance
column in the general ledger card is transcribed into the payables report. The grand totals
from each payables report are carried forward to the trial balance. Balances in the payables
report are normally credits. One payable report is prepared for each accounting unit (MOFED
and DSA Project manual, December 2002).
38
Figure 4.7: Payables Report
Me/He 26 Month___________
Name of Public Body: ____________________ Code: _____
Name of Program: _______________________ Code: _____
Name of Sub Agency: ____________________ Code: _____
Name of Sub Program: ___________________ Code: _____
Name of Project: _______________________ Code: _____
Bank Account Number:___________________
YEAR-TO-DATE
Account Account Description Payables
Code
Debit Credit
5001 Grace period payables
5002 Sundry creditors
5003 Pension contribution payable
5004 Salary payable
5021 Due to staff
5022 Due to MOFED for SSDP
50xx Other payables
________________________________
(Source: MOFED and DSA Project, December 2002)
Example: Preparing Payables Report

Based on the information given in case of HU, CCDE, you are required to prepare the
Payables report.
Payables Report
Me/He 26
Month__May_________
Name of Public Body: ______HU,CCDE______ Code: _311____
Name of Program: _______________________ Code: __01___
Name of Sub Agency: ___________________ _ Code: _07____
Name of Sub Program: ___________________ Code: _00____
Name of Project: _______________________ Code: _xxx____
Bank Account Number_____10000645839_____
YEAR-TO-
Account Account Description DATE Payables
Code
Debit Credit
5004 Salary payable 20,000
________________________________
39
TRIAL BALANCE
The trial balance is the summary of the net cumulative debit and credit balances contained in
the general ledger at the end of each month for each account code represented by a general
ledger card. The trial balance proves the arithmetical accuracy of the general ledger. The
total amount of the debit column must equal the total amount of the credit column in the trial
balance.
The trial balance serves as a basis to produce financial statements. The accountant prepares
the trial balance for each accounting unit (MOFED and DSA Project, December 2002).
According to MOFED and DSA Project also, the source documents to prepare the Trial
Balance are:
Revenue/Assistance/Loan Report, Receivables Report,
Recurrent Expenditure Report, Payable Report, and
Capital Expenditure Report, The General Ledger.
Transfer Report,
Note that in profit-making organizations, trial balances are prepared directly from the general
ledger accounts and each account will be listed in the trial balance as long as it has a balance.
However, in FGE accounting system, the trial balance is prepared from the reports already
produced for it facilitates the process and provide pertinent figures for the period end reports.
In addition to the reports mentioned above, some balance amounts are directly taken from the
general ledger accounts. The account codes that are taken from the general ledger directly to
the trial Balance are:
Letters of Credit - balances in each account should be credits.
Net Assets/Equity - balance should be credit.
Cash and Cash Equivalents - balances in each account should be debits.
40
Figure 4.8 on the next page shows the format of trial balance under FGE accounting system.
Figure 4.8: Trail Balance
Me/He 27
Month________
Name of Public Body: ____________________ Code: ______
Name of Program: _______________________ Code: _____
Name of Sub Agency: ____________________ Code: _____
Name of Sub Program: ___________________ Code: _____
Name of Project: ________________________ Code: _____
Bank Account Number ___________________
Code Account Description Debit Credit

- Revenues/Assistance/Loan: (from Revenue/Assistance/Loan
Report)
- Expenditures:
- Recurrent expenditure (Total of Recurrent Expenditure
Reports)
- Capital expenditure (Total of Capital Expenditure Reports)
- Transfers: (from Transfer Report)
- Receivables: (from Receivables Report)
- Payables: (from Payables Report)
Letters of Credit: (by account code-from General Ledger)
Net Assets/Equity (from General Ledger)
Cash and Cash Equivalents (by account code-from General Ledger)
Cash on hand
Cash at bank in foreign currency
Cash at bank
TOTAL
Prepared by Name & Sig. Checked by Name & Sig. Authorized by Name &
Sig.
41
Example: Preparing Monthly Trial Balance.
Based on the data given for HU,CCDE, you are required to prepare the monthly trial balance.
Further assume that the cash on hand is 9,800 and cash at bank is 10,000 birr.
Trail Balance
Me/He 27
Month_ May_______
Name of Public Body: ____HU,CCDE_______Code: __311____
Name of Program: _______________________ Code: ___01__
Name of Sub Agency: ____________________ Code: __07___
Name of Sub Program: ___________________ Code: ___00__
Name of Project: ________________________ Code: __xxx___
Bank Account Number __10000645839_________________
Code Account Description Debit Credit
Revenues/Assistance/Loan: (from Revenue/Assistance/Loan report 11,900
Expenditures:
Recurrent expenditure (Total of Recurrent Expenditure Reports) 101,100
Capital expenditure (Total of Capital Expenditure Reports) - -
Transfers: (from Transfer Report) 3000 103,000
Receivables: (from Receivables Report) 11,000
Payables: (from Payables Report) 20,000
Letters of Credit: (by account code-from General Ledger)
5601 Net Assets/Equity (from General Ledger)
Cash and Cash Equivalents (by account code-from General ledger
4101 Cash on hand 9,800
4102 Cash at bank in foreign currency
4103 Cash at bank 10,000
TOTAL 134,900 134,900
Prepared by Name & Sig. Checked by Name & Sig. Authorized by Name &
Sig.
Submitting Monthly Reports to MOFED

Monthly reports will be prepared and submitted to concerned body or Ministry of Finance
and Economic Development within two weeks of the last day of the month by all accounting
units. All transactions that occur during a month should be recorded daily on the transaction
register and into the appropriate general and subsidiary ledgers. However, if some
transactions for the month are not entered into the transaction register by the end of the
month, they will not be included in the report of the specified month.
Transaction register is closed on the last day of each month. Transactions that occur during
the month, but are not recorded in the transaction register, are recorded in the next month’s
transaction register. In other words, reports are prepared each month based on the
information recorded by the end of that month in the transaction register.
Ideally, transactions are recorded in the transaction register in the same month in which they
occur. However, the monthly reports should not be delayed because all transactions are not
recorded in the proper month. The monthly reports should be prepared on time. At a
minimum, all transfers should be recorded in the proper month.
42
According to MOFED and DSA Project manual, December 2002, if there is a reporting entity
that is distinct from the accounting unit, the reports must be sent to the reporting entity before
the end of the second week of the month. The reporting entity should:
 Verify the mathematical accuracy of all reports.
 Verify that totals in the revenue/assistance/loan report, recurrent expenditure report,
capital expenditure report, transfer report, receivables report, and payable report are
carried forward to the trial balance.
 Verify that the end of month balance in Part 2 of the transfer report is carried forward
to part 1 of the transfer report.
 Visit any accounting unit that does not report within two weeks and assist in the
preparation of monthly reports.
The reporting entity does not consolidate reports. The reports from the accounting units are
forwarded to Ministry of Finance and Economic Development intact. The reporting entity is
required to send their monthly reports to the Ministry of Finance and Economic Development
during the third week of the month.
Central Accounts Department at Ministry of Finance and Economic Development will:

 Verify the mathematical accuracy of all reports.
 Verify that totals in the revenue/assistance/loan report, recurrent expenditure report,
capital expenditure report, transfer report, receivables report, and payable report are
carried forward to the trial balance.
 Verify that the EOM Balance in Part 2 of the transfer report is carried forward to part 1
of the transfer report.
 Reconcile individual transfers recorded on the transfer report with its records.
 Visit any reporting entity that does not report within three weeks to identify and assist
with monthly reporting.
 Prepare and distribute various reports for FGE.
 Consolidate balances for each account into a FGE Financial Statement.
43
MODEL QUESTIONS
1. The following is an information gathered from a general ledger of public body ABCD,
having a budget code of 121/1/00/00 and bank account code of 1000077777 for the
month of June 30.
Code Description Amount

in Birr
1101 Wages and salaries 154,120
1102 Rental income 780,450
1103 Profits to individuals 560, 456
6111 Salaries to permanent staff 120,000
2019 USAID 1,450,000
1105 Dividend and chance winnings 100,000
1106 Capital gains 950,000
4002 Cash transfer for Recurrent 789,000
expenditure
1107 Agricultural income 1,500,000
1414 Court fines 10,000
2018 International monetary fund 2,000,000
5001 Grace period payable 56,000
6131 Gov’t portion of Pension contribution 45,000
3001 African development bank 12,000,000
4101 Cash on hand 12,500
4103 Cash at bank 78,000
4201 Suspense 56,000
4208 Advance to regions 250,000
5002 Sundry creditors 25,000
5501 Letter of credit-organ of state 56,000
4004 Cash transfer for Capital expenditure 500,000
Required: prepare all the monthly reports and trial balance.
2. Fill the following table with an appropriate answer

Monthly reports Source documents
Revenue/assistance/loan report
Capital & recurrent expenditure report
Transfer report
Receivables report
Payables report
Trial balance
44
UNIT 5: FINANCIAL REPORTS AND FINANCIAL STATEMENTS
INTRODUCTION
As one of the basic principles of accounting, communicating user of accounting information
through financial reports and statements is a must. Hence, business and government or non-
government organizations must prepare financial reports and help their user to satisfy their
interest on financial matters. Financial statements are intended to meet the needs of users who
are not in a position to demand reports tailored to meet their specific requirements. These
users include stakeholders such as members of the legislature, donors, lenders, tax payers and
employees.
The objective of the financial statements is to provide information about the financial
position, performance and cash flows that is useful in making and evaluating decisions about
the sources, allocation and uses of financial resources and about how the activities were
financed. In addition, the financial reporting also provides users with information about
whether resources were used in accordance with the approved budget.
Transparency in government begins with full and fair disclosure of financial information. The
FGE uses the International Public Sector Accounting Standards (IPSAS) issued by the Public
Sector Section of the International Federation of Accountants as a basis for establishing the
financial statements.
The FGE accounting system produces the following set of financial statements:
 A set of federal-level financial statements that includes:
o Statement of Financial Position
o Statement of Financial Performance
o Statement of Changes in Net Assets/Equity
o Cash Flow Statement
o Accounting Policies and Notes to Financial Statements
o Statement of Comparison of Budget and Actual Amounts – Domestic Revenue
o Statement of Comparison of Budget and Actual Amounts – External Assistance
o Statement of Comparison of Budget and Actual Amounts – Expenditure
o Comparison of Original and Adjusted Budget and Actual Amounts
o Statement of Expenditure by Functional Classification
 A set of countrywide financial statements that includes:
o Summary Statement of Domestic and External Revenues
o Summary Statement of Expenditure
o Summary Statement of Expenditure and its Statement.
In addition to the above financial statements, the accounting system also produces detailed
revenue and expenditure schedules that provide detailed information and analysis of the
summary countrywide financial statements.
45
FORMATS OF FINANCIAL REPORTS AND FINANCIAL STATEMENTS UNDER FGE
ACCOUNTING SYSTEM
GOVERNMENT OF ETHIOPIA
Statement of Financial Position

As at Sene 30 20X2
Ethiopian Birr '000

Notes 20X2 20X1
ASSETS (CURRENT)
Cash and cash equivalents 1 0 0
Receivables 2 0 0
Total Assets 0 0
LIABILITIES(CURRENT)
Current Liabilities - Payables 3 0 0
Total liabilities 0 0
Net Current
Assets/(Liabilities) 0 0
NET ASSETS/EQUITY
Accumulated surpluses/deficits 0 0
46
Statement of Financial Performance
For the year ended Sene 30, 20X2
Ethiopian Birr '000
Notes 20X2 20X1
OPERATING ACTIVITIES
Operating Revenue
Tax revenues 4 0 0
Non-tax revenues 5 0 0
Subsidies 6 0 0
Municipality revenues 7 0 0
Other revenue 8 0 0
Total operating revenue 0 0
Operating Expenses
Subsidies 0 0
Personnel services 9 0 0
Goods and services 10 0 0
Fixed assets and construction 11 0 0
Other expenses 12 0 0
Total operating expenses 0 0
Surplus/(deficit) from operating activities 0 0
NON OPERATING ACTIVITIES

External assistance 13 0 0
External loans 14 0 0
Capital revenue 15 0 0
Debt repayments – principal 16 (0) (0)
Finance costs 17 (0) (0)
Surplus/(deficit) from non-operating activities 0 0
Surplus/(deficit) for the year 0 0
47
Statement of Changes in Net Assets/Equity
Ethiopian Birr '000
Balance at 7 July 20X1 0
Changes in accounting
policy/Fundamental errors 0
Restated balance 0
Net surplus/(deficit) for the year 0
Balance as at 7 July 20X2 0
48
Cash Flow Statement
Ethiopian Birr '000 20X2 20X1
CASH FLOW FROM OPERATING
1 ACTIVITIES
Tax revenues 0 0
Non tax revenues 0 0
Other income 0 0
Miscellaneous income 0 0
Municipality revenues 0 0
Regional subsidy 0 0
Total Receipts - A 0 0
Personnel services 0 0
Goods and
services 0 0
Finance charges 0 0
Subsidies 0 0
Other expenses 0 0
Total Payments - B 0 0
Non Cash Movements
Increase/(Decrease) in payables 0 0
Increase/(Decrease) in receivables 0 0
Total Non-Cash Movements - C 0 0
Net Cash Flow from Operating Activities 0 0
CASH FLOW FROM INVESTING
2 ACTIVITIES
Sale of assets 0 0
Sale of equity 0 0
Repayment of borrowings to government 0 0
Privatization proceeds 0 0
Capital receipts from non-government 0 0
Total Receipts (A) 0 0
Fixed Assets and Construction 0 0
Govt. lending or equity investments 0 0
Total Payments (B) 0 0
Net Cash Flow from Investing Activities 0 0
49
Cash Flow Statement
For the year Sene 30, July 20X2
Ethiopian Birr '000
20X2 20X1
3 CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from external assistance 0 0
Proceeds from external loans 0 0
Total Receipts (A) 0 0
Debt repayments – external Total Payments (B) 0 0
Net Cash Flow from Financing Activities 0 0
4 NET INCREASE/(DECREASE) IN CASH &CASH EQUIVALENTS 0 0
5 Cash and Cash Equivalents at Beginning of Year 0 0
6 Net Increase/(Decrease) in Cash Equivalents During the Year 0 0
7 Cash and Cash Equivalents at End of Year 0 0
50
Accounting Policies and Notes to Financial Statements
Notes to Financial Statements
Ethiopian Birr ‘000
1 Cash and Cash Equivalents 20X2 20X1
Domestic currency
Foreign currency
Budget support
Counterpart funds
SSDP
Cash in transit
Sinking fund
Others
Domestic currency refers to local currency held in a safe as well as in a bank account.
Foreign currency is cash held in a bank account denominated in foreign currency. Budget
support refers to cash from a foreign source held in a bank account available for unrestricted
general budgetary support. Counterpart funds refer to grants held in a bank account
reserved for specific program support.
2 Receivables
Advances
Prepayments
Others ___________ ______
Advances represent amounts due from government entities and staff. Prepayments
represent amounts due from suppliers, contractors and consultants. Others represent
amounts due from peasant associations, cooperatives, individuals, private organizations
and others.
51
3 Payables 20X2 20X1
Accounts Payable
Payables within Government
Direct advances
Treasury bills
Deposits
Retentions ___________ ______
Accounts payables represent grace period payables, sundry creditors, pension

contributions payable, salary payable and other payroll deductions. Payables within
government represent amounts due to government entities and staff. Deposits represent
customs, court, hospital bid bond, VAT and other deposits.
4 Tax Revenues
Tax revenues are legally mandated payments to government. Tax revenues represent taxes
on income, profits and capital gains, value added tax and sales turnover tax on domestically
manufactured goods and services, excise tax and foreign trade taxes which include excise
tax, value added tax, customs and export duties. The breakdown of tax revenues by revenue
item is provided in the statement of comparison of budget and actual amounts – domestic
revenue.
5 Non Tax Revenues
Non-tax revenues represent administrative fees and charges, sales of goods and services and
miscellaneous revenues. The breakdown of non-tax revenues by revenue item is provided in
the statement of comparison of budget and actual amounts – domestic revenue.
52
6 Subsidies
Subsidy revenue represents treasury funds received by regions from the federal government
to execute their recurrent and capital budgets and subsidy expense represents treasury
funds transferred by the federal government to regions to execute their recurrent and capital
budgets.
7 Municipality Revenues
Municipality revenue represents different types of municipal taxes, municipal rents and
service charges and sale of goods and municipal services.
8 Other Revenues
Other revenue represents government investment income including dividend income,
residual surplus and capital charges. The breakdown of other revenues by revenue item is
provided in the statement of comparison of budget and actual amounts – domestic revenue.
9 Personnel Services
Personnel services represent government pension contributions made to pension funds and
salaries, wages, allowances/benefits paid to permanent, contracted, externally contracted
and casual staff. The breakdown of personnel services by expense item is provided in the
statement of comparison of budget and actual amounts – expenditure.
10 Goods and Services

Goods and services represent expenditure incurred on goods and supplies, traveling,
maintenance and repairs, training, stocks of emergency and strategic goods and contracted
services. The breakdown of goods and services by expense item is provided in the statement
of comparison of budget and actual amounts – expenditure.
53
11 Fixed Assets and Construction

Fixed assets and construction represent expenditure incurred in the acquisition of fixed
assets and the pre-construction and construction of buildings and infrastructure. The
breakdown of fixed assets by expense item is provided in the statement of comparison of
budget and actual amounts – expenditure.
12 Other Expenses
Other expenses include contingency and miscellaneous payments, compensation to
individuals and institutions, government investments, grants to institutions, and
contributions to international organizations. The breakdown of other expenses by expense
item is provided in the statement of comparison of budget and actual amounts –
expenditure.
13 External Assistance
External assistance represents the amounts contributed by donors as grants and are
recognized as revenue on receipt of funds. The breakdown of external assistance by donor is
provided in the statement of comparison of budget and actual amounts – external assistance.
14 External Loans
External loans represent amounts received from external lenders as loans during the fiscal
year and are recognized as revenue on receipt of funds directly or payments to suppliers on
behalf of the government. The breakdown of external loans by lenders is provided in the
statement of comparison of budget and actual amounts –external loans.
15 Capital Revenues
Capital revenue represents proceeds from the privatization of state owned enterprises, sale
of fixed assets, stocks and intangible assets and amounts received from non-governmental
sources for capital purposes. The breakdown of capital revenues by item of revenue is
provided in the statement of comparison of budget and actual amounts – domestic revenue.
54
16 Debt Repayments
Debt repayments to domestic and external lenders represent the principal amounts repaid
during the year and are recognized as expenditure. The breakdown of debt repayments by
internal and external debt is provided in the statement of comparison of budget and actual
amounts – expenditure.
17 Finance Costs
Finance costs represent payments of bank charges and interest on external and domestic
debt.
18 Long Term Foreign Loans

20X2 20X1
At the beginning of the year 0 0

Additions 0 0
Amounts written off 0 0
Repayments 0 0
Exchange Differences 0 0
At the end of the year 0 0
The amounts falling due for repayment within the next 12 months amount to Birr …..
Details of the lenders, date of obtaining loan, amount due in foreign currency and the period
of repayment are detailed below:
Name of Lender Date of loan Amount Due Period
55
19 Long Term Domestic Loans

20X2 20X1
At the beginning of the year 0 0

Additions 0 0
Repayments 0 0
At the end of the year 0 0
Maturity Analysis
Due within 1 year 0 0
Due within 2 to 5 years 0 0
Due after more than 5 years 0 0
The loans represent long term bonds issued.
20 Comparison of Budget and Actual Amounts – Domestic Revenue

The causes for material differences between the actual amounts and the budget amounts are
detailed below by item of revenue:
21 Comparison of Budget and Actual Amounts – Expenditure

The causes for material differences between the actual amounts and the budget amounts are
detailed below by item of expenditure:
22 Contingent Liabilities
A list of contingent liabilities, explaining its type, nature and circumstances should be
provided together with a reliable estimate of the probable amount.
23 Other Notes
Any other notes and disclosures that MOFED may decide to include as part of the financial
statements.
56
Accounting Policies
The principal accounting policies of the Government, which are set out below, have been
applied consistently throughout the period.
BASIS OF ACCOUNTING
The financial statements have been prepared on the historical cost basis using a modified cash
basis of accounting that recognizes the following non-cash transactions:
 Revenue is recognized when:
o Aid in kind is received.
o Payroll is processed (income tax and employee fines)
o Salary advance is made to an employee (interest on salary advances)
o Withholding tax is deducted from the amount due to a supplier
 Expenditure is recognized when:
o Payroll is processed (salary and pension expenses)
o Aid in kind is received
o Goods are received or services are rendered
o At the end of the year, a grace period payable is accounted for.
 Intergovernmental transfers are recognized without actual cash movement
 Amounts borrowed using treasury bills and direct advances from the National Bank
of Ethiopia are recognized as current liabilities
REVENUE
Revenues are recognized on receipt of amounts except as stated above.
FINANCE COSTS
Finance costs are recognized as an expense in the period in which they are paid.
57
Accounting Policies
TRANSLATION OF FOREIGN CURRENCIES

Transactions denominated in foreign currencies are translated into Ethiopian Birr at the rates
of exchange ruling at the date of the transaction.
Cash and bank balances that are denominated in foreign currencies are translated at the
rates of exchange ruling at the year end and the exchange gains/loss arising from such
translation are recognized as revenue/expenditure respectively.
CONSOLIDATION
The accounts of controlled entities are not consolidated– for example Ethiopian Airlines and
Ethiopian Telecommunications Corporation.
58
Statement of Comparison of Budget and Actual Amounts - Domestic Revenue
for the year ended Sene 30, 20X2
Ethiopian Birr '000
20X2 20X1
Budget Actual Variance Budget Actual Variance
OPERATING REVENUE
Tax revenues
Tax on income, profit and capital gains
Value Added Tax on goods & services
Excise Tax
Sales turnover tax on goods & services
Stamp sales and duty
Customs Duty on imported goods
Excise Tax on imported goods
Value Added Tax on imported goods
Export Duties
Timber Tax
Municipality Tax revenue
Total tax revenues
Non-tax revenues
Administrative fees and charges
Sales of public goods and services
Miscellaneous revenue
Municipality revenues
Total non-tax revenues
Subsidies
External assistance
External loans
Total operating revenues
59
Statement of Comparison of Budget and Actual Amounts - Domestic Revenue
Ethiopian Birr '000
20X2 20X1
Varianc
Budget Actual Variance Budget Actual e
Other revenues
Government investment income
Dividend income
Residual surplus
Interest income and capital charges
Total government investment income
Contribution to pension funds

Capital revenue
Sale of properties, stock and intangible assets
Privatization proceeds
Capital transfers from non-governmental sources
Collection of principal from on-lending

Municipality capital and investment revenue
Total capital revenues
Total other revenues
TOTAL REVENUE
60
Statement of Comparison of Budget and Actual Amounts - External Assistance

Ethiopian Birr '000

20X2 20X1
Adjuste
Adjusted d
External Assistance
List of donors
0 0 0 0 0 0
Total 0 0 0 0 0 0
61
Statement of Comparison of Budget and Actual Amounts - External Loan

Ethiopian Birr '000

20X2 20X1
Adjusted Adjusted
External Loan
List of lenders
0 0 0 0 0 0
Total External Loan 0 0 0 0 0 0
62
Statement of Comparison of Budget and Actual Amounts - Expenditure

Ethiopian Birr '000
20X2 20X1
Adjusted Adjusted
PERSONNEL SERVICES Budget Actual Difference Budget Actual Difference
Emoluments
Salaries to permanent staff 0 0 0 0 0 0
Salaries to military staff 0 0 0 0 0 0
Wages to contract staff 0 0 0 0 0 0
Wages to casual staff 0 0 0 0 0 0
Wages to external contract staff 0 0 0 0 0 0
Miscellaneous payments to staff 0 0 0 0 0 0
Total 0 0 0 0 0 0
Allowances/benefits
Allowances to permanent staff 0 0 0 0 0 0
Allowances to military staff 0 0 0 0 0 0
Allowances to contract staff 0 0 0 0 0 0
Allowances to external contract staff 0 0 0 0 0 0
Total 0 0 0 0 0 0
Pension contributions
Cont to permanent staff pensions 0 0 0 0 0 0
Cont to military staff pensions 0 0 0 0 0 0
Total 0 0 0 0 0 0
TOTAL PERSONNEL SERVICES 0 0 0 0 0 0
GOODS AND SERVICES
Goods and supplies
Uniforms, clothing, bedding 0 0 0 0 0 0
Office supplies 0 0 0 0 0 0
Printing 0 0 0 0 0 0
Medical supplies 0 0 0 0 0 0
Educational supplies 0 0 0 0 0 0
Food 0 0 0 0 0 0
63
Statement of Comparison of Budget and Actual Amounts - Expenditure

Ethiopian Birr '000 20X2 20X1
Adjusted Adjusted
Budget Actual Difference Budget Actual Difference
Fuel and lubricants 0 0 0 0 0 0
Other material and supplies 0 0 0 0 0 0
Miscellaneous equipment 0 0 0 0 0 0
Agriculture, forestry & marine inputs 0 0 0 0 0 0
Veterinary supplies and drugs 0 0 0 0 0 0
Research and development supplies 0 0 0 0 0 0
Ammunition and ordinance 0 0 0 0 0 0
Total 0 0 0 0 0 0
Traveling & official entertainment
Per diem 0 0 0 0 0 0
Transport fees 0 0 0 0 0 0
Official entertainment 0 0 0 0 0 0
Total 0 0 0 0 0 0
Maintenance and repair services:
Vehicles and other transport 0 0 0 0 0 0
Aircraft and boats 0 0 0 0 0 0
Plant, machinery, and equipment 0 0 0 0 0 0
Buildings, furniture and fixtures 0 0 0 0 0 0
Infrastructure 0 0 0 0 0 0
Military equipment 0 0 0 0 0 0
Total 0 0 0 0 0 0
64
Statement of Comparison of Budget and Actual Amounts - Expenditure(Cont'd)

Ethiopian Birr '000
20X2 20X1
Adjusted Adjusted
Contracted services Budget Actual Difference Budget Actual Difference
Contracted professional services 0 0 0 0 0 0
Rent 0 0 0 0 0 0
Advertising 0 0 0 0 0 0
Insurance 0 0 0 0 0 0
Freight 0 0 0 0 0 0
Fees and charges 0 0 0 0 0 0
Electricity charges 0 0 0 0 0 0
Telecommunication charges 0 0 0 0 0 0
Water and other utilities 0 0 0 0 0 0
Total contracted services 0 0 0 0 0 0
Training services
Local training 0 0 0 0 0 0
External training 0 0 0 0 0 0
Total training services 0 0 0 0 0 0
Emergency & strategic goods
Stocks of food 0 0 0 0 0 0
Stocks of fuel 0 0 0 0 0 0
Other stocks 0 0 0 0 0 0
Total stocks 0 0 0 0 0 0
TOTAL GOODS AND SERVICES 0 0 0 0 0 0
65
Statement of Comparison of Budget and Actual Amounts - Expenditure(Cont'd)

Ethiopian Birr '000
20X2 20X1
Adjusted Adjusted
Fixed Assets And Construction Budget Actual Difference Budget Actual Difference
Purchase of Fixed Assets
Vehicles & other vehicular transport 0 0 0 0 0 0
Aircraft, boats, etc. 0 0 0 0 0 0
Plant, machinery and equipment 0 0 0 0 0 0
Buildings, furnishings and fixtures 0 0 0 0 0 0
Livestock and transport animals 0 0 0 0 0 0
Military equipment 0 0 0 0 0 0
Total 0 0 0 0 0 0
Construction
Pre-construction activities 0 0 0 0 0 0
Construction of buildings-residential 0 0 0 0 0 0
Const. of building-non-residential 0 0 0 0 0 0
Construction of infrastructure 0 0 0 0 0 0
Construction for military purposes 0 0 0 0 0 0
Total 0 0 0 0 0 0
Total Fixed Assets & Construction 0 0 0 0 0 0
SUBSIDIES 0 0 0 0 0 0
FINANCE COSTS
Interest & bank charges – ext. debt 0 0 0 0 0 0
Interest & bank charges – dom. debt 0 0 0 0 0 0
TOTAL 0 0 0 0 0 0
66
Statement of Comparison of Budget and Actual Amounts - Expenditure (Cont'd)

Ethiopian Birr '000
20X2 20X1
Adjusted Adjusted
OTHER EXPENSES Budget Actual Difference Budget Actual Difference
Principal debt payments
Payment – principal of external debt 0 0 0 0 0 0
Payment - principal of domestic debt 0 0 0 0 0 0
Total 0 0 0 0 0 0
Pension payments
Pension payment to permanent staff 0 0 0 0 0 0
Pension payment to military staff 0 0 0 0 0 0
Total 0 0 0 0 0 0
Grants & Cont. to institutions 0 0 0 0 0 0
Government investment 0 0 0 0 0 0
Cont. to international organizations 0 0 0 0 0 0
Contingency 0 0 0 0 0 0
Comp. to individuals and institutions 0 0 0 0 0 0
Grants and gratuities to individuals 0 0 0 0 0 0
Contributions to sinking funds 0 0 0 0 0 0
Miscellaneous payments 0 0 0 0 0 0
Total Other Expenses 0 0 0 0 0 0
TOTAL EXPENSES 0 0 0 0 0 0
67
Comparison of Original and Adjusted and Actual Amounts
Ethiopian Birr '000

Original Adjusted
Variance Actual Variance
Budget Budget
6100 PERSONNEL SERVICES
6110 Emoluments
6120 Allowances/benefits
6130 Pension contribution
6200 GOODS AND SERVICES
6210 Goods and supplies

Traveling and official entertainment
6230
services
6240 Maintenance services
6250 Contracted services
6270 Training services

Stocks of emergency and strategic
6280
goods
FIXED ASSETS AND
6300
CONSTRUCTION
6310 Fixed assets
6320 Construction
6400 OTHER PAYMENTS
6410 Subsidies, investments and payments
6000 TOTAL
68
Statement of Expenditure by Functional Classification
Ethiopian Birr '000
Administration & General Services Economic Services Social Services Others

Total
100 200 300 400
Code Category and Sub-Category
Adjusted Adjusted Adjusted Adjusted

Actual Variance Actual Variance Actual Variance Actual Variance Budget Actual Variance
Budget Budget Budget Budget
6100 PERSONNEL SERVICES
6110 Emoluments
6120 Allowances/Benefits
6130 Pension Contributions
6200 GOODS AND SERVICES
6210-20 Goods and Supplies
6230 Travel & Entertainment
6240 Maintenance & Repair
6250 Contracted Services
6270 Training Services
Stocks of Emergency &

6280
Strategic Goods
69
Administration & General Services Economic Services Social Services Others
Total
100 200 300 400
Code Category and Sub-Category
Adjusted Adjusted Adjusted Adjusted

Actual Variance Actual Variance Actual Variance Actual Variance Budget Actual Variance
Budget Budget Budget Budget
FIXED ASSETS &

6300
CONSTRUCTION
6310 Fixed Assets
6320 Construction
6400 OTHER PAYMENTS
6410 Subsidies, inv. & payments
TOTAL
70
Summary Statement of Domestic and External Revenues
ITEM OF REVENUE
A. ORDINARY REVENUE
Direct Tax
Indirect Tax
Taxes on Foreign Trade
Government Investment Income
Other Revenue
Total Ordinary Revenue
B. EXTERNAL ASSISTANCE
Counter Part Fund Grants
Technical Assistance
Total External Assistance
C. CAPITAL REVENUE
Domestic Sources
Counter Part Fund Credit
External Loan
Total Capital Revenue
D. DOMESTIC BORROWING
GRAND TOTAL
71
Summary Statement of Expenditure
Particulars Recurrent Expenditure Capital Expenditure Subsidie Total
s
Administrative & General Service: 100 series
Organs of State
Justice and Security
National Defense
General Services
Others:
Economic Services: 200 series

Agriculture & Rural Development
Water Resources
Trade and Industry
Mines and Energy
Transport and Communication
Construction
Others:
Social Services: 300 series

Education
Information and Communication
Culture and Sport
Health
Labor and Social Affairs
Prevention and Rehabilitation
Others:
Other Expenditures: 400 series

Transfers
Subsidies to regions
Debt
Contingencies and Bank Charges
Miscellaneous
Others:
Grand Total
72
Summary Statement of Expenditure and its Financing
1. EXPENDITURE
A. Recurrent Expenditure
Administrative and General Service
Economic Service
Social Service
Other Service
Total Recurrent Expenditure
B. Capital Expenditure
Economic Development
Social Development
General Development
Other Development
Total Capital Expenditure
C. Subsidy to Regions
Total Expenditure
2. FINANCING
A. Domestic Revenue:
Tax Revenue
Non Tax Revenue
Total Domestic Revenue
B. External Assistance:
Counter Part Fund Assistance
Technical Assistance
Total External Assistance
C. Borrowings:
External Loan & Credit
Counter Part Fund Credit
Project Loan
External Loan Total
Domestic Loan
Direct Advance N.B.E.
Treasury Bills
Deposit & Other Account Balances
Net Domestic Loan & Other Deposit Accounts
Grace Period Credits
Total Borrowing
Total Financing
73

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UNIT 3: RECORDING COMMON TRANSACTIONS OF FGE

Example: Recording Cash Transfers from MOFED to PB

Transaction Register of MOFED:

Transaction Register of Bank Account #2:

Check you progress!

Transaction Register of Customs Authority:

COLLECTION OF REVEVUE/ ASSISTANCE/LOAN

Transaction Register of Ministry of Foreign Affairs:

Transaction Register of Internal Revenue:

Cash payment by MOFED on Behalf of Public Bodies

Transaction Register of MOFED:

Transaction Register of Ministry of Health:

CASH EXPENDITURE: LETTER OF CREDIT

Transaction Register - Restricted Bank Account of Ministry of Health:

Letter of Credit Opened by MOFED on behalf of Public Body

Transaction Register bank account MOA:

Transaction Register - Restricted Bank Account of Ministry of Agriculture:

Check your progress!

Cash Payment by Public Body to Region

CASH EXPENDITURE: PAYMENTS REQUIRING WITHHOLDING OF TAX

Transaction #2: Transfer to MOFED

Transaction Register of MOFED:

Transaction #1: Payment effected to supplier

Check your progress!

CASH EXPENDITURE: CONSTRUCTION PROJECTS

Transaction Register of public Body:

Transaction #2: payment certificate when 40% complete.

Accountant prepares a check for 1,120,000 Birr as follows:

Transaction Register of public Body:

Transaction #4: payment certificate when 100% complete.

Transaction Register of public Body:

Transaction Register of public Body:

Check your progress!

B. Payment certificate when 30% complete.

CASH EXPENDITURE: SALARY

No Description TB Account Others Cash at bank

2 Salary Expense 01 6111 40,000

Transaction #2: Adjust Pension transfer

No Description TB Account Others Cash at bank

Transaction Register of MOFED:

Transaction Register of MOFED:

Transaction Register of MOA:

2 Salary Expense 01 6111 38,000

RECEIVABLES AND PAYABLES

Transaction Register of MOFED:

Transaction Register of Public Body:

Transaction Register of MOFED:

Transaction Register of Public Body:

Receivables and Payables: with Employees

Transaction #1: cash transfer from MOFED

Transaction #2: Payment of Advance

Transaction Register of Public Body:

Transaction Register of Public Body:

Receivables and Payables: Employee Transferred with Salary Advance

Transaction Register of Public Body #2:

Transaction Register of Public Body:

Grace Period Payables

Receivable and Payables: Deposits

Example: Receipt and Return of Deposit

Transaction #2: Refund of Deposit.

Total (To Trial Balance)

Example: Preparing revenue/assistance/Loan Report

RECURRENT EXPENDITURES REPORT