Unit Two

General and Subsidiary Ledgers

Introduction

This unit is made up of three main sections. In the first part a complete description
of ledgers is presented. How the ledgers are structured and organized as general
and subsidiary ledgers are also discussed.

The unit mainly describes the purpose and format of each ledger and the process
of recording entries in ledgers. The processes used in posting to the general
ledger and in the subsidiary ledgers from all FGE Registers are the same
regardless of whether the transactions involve domestic or foreign currency. For
simplicity, in this unit, the term Register means local currency transaction register
and foreign currency transaction register.

After you complete this unit, you will be able to:

 Analyze the relationship that exists between controlling and subsidiary
ledger
 Explain how ledgers in FGE accounting system are structured into general
and subsidiary ledger
 Identify the ledgers in FGE accounting system easily based on its
organization
 List the activities in finance section at the end of the month and the budget
year.

Description of Ledgers
A ledger is the entire group of accounts maintained by an accounting unit. The
ledger summarizes transactions by accounts. The ledgers summarize the
transaction information from registers in the form of accounts that facilitate
reporting of financial results. Transactions are recorded in the register, but reports
are produced from the ledgers. Two types of ledgers are maintained in the FGE
accounting system: General Ledgers and Subsidiary Ledger (MOFED and DSAS
Project manual, December, 2002).

General Ledger
A ledger card is maintained for every account code recorded in the register. Every
amount that is entered as either a debit or credit on the Register is also entered to
the corresponding debit or credit column of the appropriate ledger card. The
aggregate of all such ledger cards is the general ledger. The general ledger is a
set of self-balancing ledger cards because at all times the total debits and the total
credits recorded in the general ledger are equal. The general ledger is maintained
to classify information reported in the Register by respective account codes. All
transaction amounts recorded in the Register are entered on ledger cards in the
general ledger. The balances for all individual accounts are maintained in the
general ledger. Because the general ledger serves as a basis to prove that the net
cumulative debit and credit balances of all accounts are equal, the general ledger
simplifies and improves the report generation process (MOFED and DSA Project
manual, December, 2002).

38
Subsidiary Ledger
The accountant maintains a general ledger for each register. Where more than
one BI shares the same bank account, the accounting unit maintains one Register
and one general ledger for the bank account. A system of control accounts in the
general ledger and supporting subsidiary ledgers is used to maintain sufficient
account balance detailed to facilitate management reporting requirements. A
control account is an account in the general ledger that maintains the total balance
of all related accounts in a subsidiary ledger. A subsidiary ledger is a ledger that is
separate from the general ledger and contains transaction details of each control
account in the general ledger. Any account in the general ledger that requires
more detail than simply the total account balance becomes a control account with
a Subsidiary Ledger (MOFED and DSA Project manual, December, 2002).

A ledger card is maintained for every control account code recorded in the general
ledger. Either every amount that is entered as a debit or credit on a control
account's ledger card in the general ledger is also entered to the corresponding
debit or, credit column in the subsidiary ledger card. The aggregate of all
subsidiary ledger cards for a single control account is the subsidiary ledger. For
example, expenditure account code 6111 salary expense has a ledger card in the
general ledger that contains all salary expenses recorded in the transaction
register .A set of subsidiary cards, one for each BI, also is maintained for
expenditure account code 6111.At all times, the net cumulative balance of debits
and credits recorded in the subsidiary ledger is equal to the respective net
cumulative balance of debits and credits of the corresponding control account in
the general ledger (MOFFED and DSA Project manual, December,2002).

A subsidiary ledger is not a set of self-balancing accounts. Not all debits in a

subsidiary ledger are equal to all credits in the subsidiary ledger. A subsidiary
ledger's total debits and credits equal the balance in the corresponding control
account in the general ledger. The purpose of control accounts and subsidiary
ledger accounts is to facilitate the report generation process, minimize the size of
the general ledger, and maintain sufficiently detailed records regarding account
balances to assist proper financial management. For example, total of advances
to staff is a control account in the general ledger, but the amount owed by each
staff member is a subsidiary ledger account in the subsidiary ledger. Total of
advances to staff is a control account in the general ledger because the reporting
requirements require only the total amount of the advances to staff (rather than
the amount owed by each staff member). In addition, it is likely that the number of
staff members who owe advances is significant, and it may be cumbersome to
maintain the amounts owed by each staff member in the general ledger.
However, the accounting unit will maintain a record of the amount owed by each
staff member in a subsidiary ledger in order to monitor repayment of the amounts
owed from each staff member. The accountant maintains a set of subsidiary
ledger cards for each control account in the general ledger. However, a subsidiary
ledger is not maintained for all accounts in the general ledger. Subsidiary ledgers
are only maintained for accounts within the general ledger that requires more
detail than simply the total account balance (MOFFED and DSA Project manual,
December, 2002).

39
Structures and Organization of Ledgers
This section presents the structure of ledgers, which is presented to discuss about
recurrent Expenditure, revenue, and other accounts, transfers, cash and cash
equivalents, receivables, payables, and letters of credit. In this section,
organization of ledgers in FGE accounting system will also be discussed.
Structure is about the relationship that exists between general and subsidiary
ledger and organization is about the systematic grouping in general ledger. You
will study this issue in the next presentations.

Structure of Ledgers

This section describes when an account in the general ledger is treated as a

control account. Two criteria define whether an account code is a control account
with a related subsidiary ledger:
 Monthly reporting requirements
 Management and control of the account balance

Recurrent and Capital Expenditure

An accounting unit is required to report recurrent and capital expenditures at the

level of each BI managed by it. Expenditure control accounts are maintained in the
general ledger for each item of expenditure and type of budget. The control
account contains information whose detail is shown in the subsidiary ledger. In
order to also track and report actual expenditure at the level of each BI managed
by the accounting unit, a subsidiary ledger is maintained for each expenditure
control account by BI. Accounts in the subsidiary ledger provide information on
total expenditures by type of budget and item of expenditure for each BI managed
by the accounting unit (MOFED and DSA Project manual, December, 2002).

Revenue

An accounting unit is required to report revenue at the level of the accounting unit
and not the level of each BI managed by it. In order to record and report actual
revenue at the level of the accounting unit, an account should be maintained in the
general ledger for each item of revenue by account code. The general ledger
provides information on total revenues by item of revenue for the accounting unit
as a whole. Since there is no reporting requirement at the level of each BI, a
subsidiary ledger is not maintained for items of revenue (MOFED and DSA Project
manual, December, 2002).

Other Accounts
Other categories of accounts maintained in the general ledger include:
 Transfers
 Cash and Cash Equivalents
 Receivables
 Payables
 Letters of Credit
 Net Assets/Equity

40
An accounting unit is required to report on accounts in these categories at the
level of the accounting unit only and not at the level of each BI managed by it.
However, some of these account categories contain control accounts with
Subsidiary Ledgers.

Transfers: Transfers accounts typically are not control accounts and have no
related Subsidiary Ledgers.

Cash and Cash Equivalents: Cash and Cash Equivalents accounts typically are
not control accounts and have no related Subsidiary Ledgers. If the accounting
unit controls more than one safe, a Subsidiary Ledger is needed for each safe
under the general ledger control account for Cash in Safe(MOFED&DSA
Project,December,2002) .

Receivables, Payables, and Letters of Credit: Receivables, payables, and

letters of credit accounts typically are control accounts with related Subsidiary
Ledgers. Accounts in the Subsidiary Ledgers identify individual items under the
control account (MOFED and DSA Project, December, 2002).

Organization: The general ledger is organized into seven broad categories

comprising:
 Revenue, Assistance or Loan accounts in sequence of the account codes
 Expenditure accounts in sequence of the account codes
 Transfer accounts in sequence of the account codes
 Asset accounts in sequence of the account codes
 Liability accounts in sequence of the account codes
 Letters of Credit accounts in sequence of the account codes
 Net Asset/Equity account
The subsidiary ledger is organized by the related control account maintained in
the General Ledger (MOFED and DSA Project manual, December, 2002).

Recording Entries in Ledgers

In this section, you will study the formats of ledgers. The type of information that
each entry in the ledger requires from a transaction register is also the focus of
your study in the section. Try to get the ledger formats from government
institutions found in your area and ask people working in finance section to get
clear and practical experience in addition to your reading.
Recording Transactions into the Ledger Card of the General Ledger

Each transaction recorded in a register is also recorded in the related general

ledger. Each transaction is recorded in two separate ledger cards because two
accounts are affected by each transaction. Each account is recorded on its
appropriate ledger card in the general ledger immediately after it is recorded in the
register. The only source document to the general Ledger is the register.

41
 Figure 3.1: Ledger Card

ME/HE/17 THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA

MINISTRY OF FINANCE AND ECONOMIC DEVELOPMENT
LEDGER CARD
Public body ______________________ Code _______ page _______
Program _____________________Code _____
Sub Agency _______________________ Code _____ Type of Budget
_____________
Sub-program ______________________ Code _____
Project _____________________ Code _____ account
Code______________
Source of Finance __________________Code _____
Bank Account No.___________________ Description
______________

Reference from
Register Balance
Date Month Pag Item Date Description Debit Credit Debit Credit
e no

(Source: MOFED&DSA Project manual, December 2002)

The ledger card has two parts:

 Top of the form contains information that identifies the general ledger to
which the card belongs, and the specific account code and type of budget
recorded on the card.

 The table contains information from the transaction register for computing
the balance for the account code/type of budget.

Not all information on the left side at the top of the ledger card is needed for all
general ledger cards. The information provided on the left side must be sufficient
to uniquely identify the general ledger from all other general ledgers. The detail
of information required will vary.
The information on the right side at the top of the ledger card is required to
uniquely identify the ledger card from all general ledgers except that the space for
description is not necessary for a ledger card in the general ledger.

According to MOFED&DSA Project, the table on the ledger card in the general
ledger contains the following features:

 Date is the date that the entry is made in the ledger card, not the date of
the transaction.

42
  Reference from registrar contains sufficient information to uniquely identify
the Register source of the entry.

 Description is option. If additional information about the transaction is

desired, it should be written here.

 Debit and Credit contains the amount from the Register for the transaction.
Every amount that is entered as a debit (or credit) on the register is entered
in a corresponding debit (or credit) column of a ledger card in the general
ledger.
 Balance is the net cumulative balance of the account. After every
transaction is recorded in the debit or credit column of the ledger card in the
general ledger, the net cumulative balance of the account is derived by
appropriately adding or subtracting the amount of the current transaction
from the previous net cumulative debit or credit balance. The purpose of
the monthly net cumulative debit and credit balances is to record the net
balance in the monthly reports and Trial Balance.

Recording Transactions into the Foreign Currency Cash Account Ledger

Card
The cash account ledger card for Account Code 4102 "cash at bank in foreign
currency" requires a special format. This account code, and only this account
code, maintains a balance in Birr and in foreign currency denomination. The same
information is recorded in the foreign currency transaction Register.
The foreign currency cash account ledger card is shown in figure 3.2. The foreign
currency cash account ledger card is identical to any other ledger card, except
that the amount of each transaction recorded from the foreign currency transaction
register is recorded on the card twice: once in Birr and once in foreign currency. In
addition, the net cumulative balance of the account is kept in both currencies.

43
 Figure 3.2: Foreign Currency Cash Account Ledger Card
ME/HE/18
THE FEDERAL DEMOCRATIC REPUBLIC OF ETHOPIA
MINISTRY OF FINANCE & ECOMOCIS DEVELOPMENT
Foreign Currency Cash Account Ledger Card
Page ____
Public Body __________ Code_______
Bank Account No._________ Code ______ Account Code
4102
Donor/lender _____________ Code _____________

Reference from
Dat Register Cash at Bank Balance Cash at Bank Balance
e Desc (birr) ((FC)
riptio
n
mont Pag Item Dat
h e no e Debit Credi Debit Credi Debit Cre Debi Cr
t t dit t edi
t

(Source: MOFED and DSA Project manual, December 2002)

Recording Transactions into the Ledger Card of the Subsidiary Ledger

A ledger card in the subsidiary ledger is maintained only for control accounts in
the general ledger. Transactions are recorded on the appropriate ledger cards in
the subsidiary ledger from the register immediately after they are recorded in the
ledger cards in the general ledger. The only source document for the subsidiary
ledger is the register. The format of a ledger card in the subsidiary ledger is the
same as the format of the ledger card in the general ledger shown in figure 3.1.
Ledger cards are printed in two colors. One color of cards should be used for
general ledger account only, while the other should be used for all subsidiary
ledger accounts. Not all information on the left side at top of the ledger card is
needed for all subsidiary ledger cards. The information provided on the left side
must be sufficient to uniquely identify the related general ledger. If the subsidiary
ledger consists of budgetary institutions, sufficient information to uniquely identify
the budgetary institutions is necessary. The detail of information required will vary
(MOFED and DSA Project, December 2002).

The information on the right side at the top of the ledger card is required to
uniquely identify the control account in the general ledger, except the description.
If the subsidiary ledger consists of individual item (such as individual staff for
advances or individual letters of credit), sufficient description is necessary to
uniquely identify the individual account in the subsidiary ledger.

44
According to MOFED and DSA Project, the table in the subsidiary ledger contains
similar information to that of the general ledger such as date, reference,
description, debit and credit sides and balances. After every transaction is
recorded in the debit or credit column of the ledger card in the subsidiary ledger,
the net cumulative balance of the account is derived by appropriately adding or
subtracting the amount of the current transaction from the previous net cumulative
debit or credit balance

The net debit and credit cumulative balances on all ledger cards in a subsidiary
ledger should be totaled on a monthly basis and compared to the balance on the
control account's ledger card in the general ledger. The purpose is to verify the
accuracy of the total net balance in the subsidiary ledger with net balance in the
control account in the general ledger and to produce accurate monthly reports for
expenditure (MOFED and DSA Project, December 2002).

Month end activities related to General and subsidiary ledgers

The general ledger account balances must be determined at the end of each
month. The total cumulative balance of all debit and credits on all ledger cards in
the general ledger must be in balance. Where the net cumulative debits and
credits recorded on all ledger cards in the General ledger are imbalance, an error
exists. The following types of errors should be verified to balance the general
ledger (MOFED and DSA Project manual, December, 2002).
 An incorrect amount is transcribed into the Ledger Card from the
Register.
 An amount is incorrectly posted into the credit column of a ledger card in
the general ledger instead of into the debit column, and vice versa.
 Only one side (either debit or credit) of a transaction is posted into the
general ledger and the other portion (either debit or credit) of he
transaction is not posted into the general ledger.
 An arithmetic error has occurred in the computation of the net debit or
credit balance of a ledger card in the general ledger.
 Permanent account balances are not carried forward correctly from the
previous year.

At the end of each month, the net cumulative debit or credit balance for each
ledger card in the subsidiary ledger should be calculated. The total net cumulative
debit or credit balance for all ledger cards in the subsidiary ledger must be equal
to net cumulative debit or credit balance on the respective control account's ledger
card in the general ledger. Where total net cumulative debits or credit balance for
all ledger cards in the subsidiary ledger is not equal to the net cumulative debit or
credit balance on the respective control account's ledger card in the general
ledger, an error exists (MOFED and DSA Project, December, 2002).

The following types of errors should be verified to balance the subsidiary and
general ledgers:
 An incorrect amount is transcribed into the ledger from the register.
 An amount incorrectly posted into the credit column of a Ledger Card in the
subsidiary ledger instead of into the debit column, and vice versa.
 An arithmetical error has occurred in the computation of the net debit or
credit balance of a ledger card in the subsidiary ledger.

45
Permanent accounts balances are not carried forward correctly form the previous
year.

Year end activities related to General and subsidiary ledgers

In addition to the monthly routines, at the end of each year, a transfer of the debit
or credit balances to the Net Assets/Equity account is required to close
the temporary accounts in the general ledger. The temporary accounts are
accounts in the following account categories:
 Revenue, Assistance and Loan items comprising account codes 1000
to 3999.
 Expenditure items comprising account codes 6000 to 6999.
 Transfers comprising account codes 4000 to 4099
The closing entry is the last entry made at the end of the fiscal year after all other
transactions are captured. The closing entry ensures that temporary accounts
start each fiscal year with a zero balance. The general ledger begins each new
fiscal year with carry forward balances in the permanent accounts from the
previous year (MOFED and DSA Project manual, December, 2002).

At the end of each year, the temporary accounts in the general ledger are closed
to the net assets/equity account as described above. Any subsidiary ledger
corresponding to a temporary account in the general ledger also is considered
closed. A new subsidiary ledger is started each year for each temporary control
account. All accounts in the new subsidiary ledger begin the year with a zero
balance. Accounts in other account categories are permanent accounts and are
not closed each year. These permanent accounts carry their previous year's
balance forward to the next fiscal year. Any subsidiary ledgers corresponding to
permanent account in the general ledger also carry forward to the next year
(MOFED& and DSA Project manual, December, 2002).

Summary
Transactions are recorded in the register, but reports are produced from the
ledgers. Two types of ledgers are maintained in the FGE accounting system:
General ledgers and subsidiary ledgers. Because the general ledger serves as a
basis to prove that the net cumulative debit and credit balances of all accounts are
equal, the general ledger simplifies and improves the report generation process.
The general ledger is organized into seven broad categories comprising in FGE
accounting systems.

Any account in the general ledger that requires more detail than simply the total
account balance becomes a control account with a subsidiary ledger. The purpose
of control accounts and subsidiary ledger accounts is to facilitate the report
generation process, minimize the size of the general ledger, and maintain
sufficiently detailed records regarding account balances to assist proper financial
management.

Based on two criteria that define whether an account code is a control account
with a related subsidiary ledger, structure of ledgers in FGE accounting system is
summarized as follows:

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A: Subsidiary Ledgers for Expenditure Control Accounts
Source of Funding Sub Ledger Items
Treasury Yes By BI for each item of
Expenditure/type of budget
Loans Yes By BI for each item of expenditure
Assistance Yes By BI for each item of
expenditure/type of budget

B: Subsidiary Ledgers for Revenue, Assistance and Loan Accounts

Source of Funding Sub Ledger Items
Treasury No Not applicable
Loans No Not applicable
Assistance No Not applicable

C: Subsidiary Ledgers for Other Accounts

Codes Sub Ledger Items
Cash at Bank No Not applicable
Cash in Safe Yes By safe, if accounting unit
controls more than one safe
Transfers No Not applicable
Receivables Yes By individual item
Payables Yes By individual item
Letters of Credit Yes By individual item
Net Assets/Equity No Not applicable

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 Unit Three
Analysis of Transactions

3.1. 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.

Cash Transfers: Between Bank Accounts at Public Bodies and MOFED

Cash is transferred from MOFED bank accounts to bank accounts of public
Bodies, and cash is transferred from bank accounts of public Bodies to MOFED
bank accounts. These transfers are done in the form of Checks, and Direct bank
transfers evidenced by bank advices.

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: Assume a public Body receives from MOFED a transfer of Birr 100,000
for Capital expenditure and also further assume that you are an accountant in both
the PB and MOFED

Transaction Register of MOFED:

No Description TB Accoun Others Cash at bank
t 4105
Number
Dr Cr Dr Cr
1 Cash transfer to -- 4004 100,00 100,00
PB 0 0

Transaction Register of Public Body:

No Description TB Accoun Others Cash at bank
t 4103
Number
Dr Cr Dr Cr
1 Cash transfer from - 4004 100,000 100,000
MOFED

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.

48
  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 100,000 to a public body for capital expenditure.
The bank deducts 2000 birr as a service charge; the public body receives Birr
98,000.
Transaction Register of MOFED:
No Description type of Account Others Cash at bank
budget Number 4105
Dr Cr Dr Cr
1 Cash transfer to PB 4004 100,00 100,00
0 0

Transaction Register of Public Body:

No Description type of Account Others Cash at bank
budge Number 4103
t
Dr Cr Dr Cr
1 Bank Service Charge 02 6256 2000
Cash transfer from 4004 100,000 98,000
MOFED

Cash Transfers: Between Bank Accounts at Public Bodies and MOFED:

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 Bank4105 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 60,000. The cash is transferred
to MOFED.

Transaction Register of MOFED

No Description TB Account Others Cash at bank
Number 4105
Dr Cr Dr Cr
1 Cash transfer from PB - 4009 60,000 60,000

Transaction Register of Public Body:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Cash transfer to - 4009 60,000 60,000
MOFED

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,

49
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.

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 with appropriate approval. 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.

Transaction Register of 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 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,
and Direct bank transfers evidenced by bank advices. 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.

Example: Public Body #1 transfers Birr 90,000 to public Body #2.

Transaction Register of public Body #1:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Cash transfer to PB #2 - 4008 90,000 90,000

Transaction Register of public Body #2:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Cash transfer to PB - 4008 90,000 90,000

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 #1

Cash Transfers: Within Public Body

In the same Manual prepared by MOFED&DSDA 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 form of: Checks, and Direct bank transfers evidenced by bank advices.
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 80,000 to Bank Account #2

Transaction Register of Bank Account #1:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Cash transfer to BA #2 - 4011 80,000 80,000

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 80,000 80,000

3.2 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.

Example: Assume Ministry of Health (MOH) requests MOFED to pay customs

duty amounting to Birr 250,000 on its behalf to the customs Authority (CA) for
motor vehicles from its capital expenditure budget and further assuming that you
are the accountant in these institutions.

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Solution:
Transaction Register of MOFED:
No Description TB Accoun Others Cash at bank
t 4105
Number
Dr Cr Dr Cr
1 Transfer to MOH - - 4054 250,000
Customs duty
Transfer from CA- - 4055 250,000
Customs duty

Transaction Register of Ministry of Health:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Purchase of motor 02 6311 250,000
vehicles
Transfer from - 4054 250,000
MOFED-Customs
duty

Transaction Register of Customs Authority:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Transfer to MOFED - 4055 250,000
Duty on Motor - 1301 250,000
vehicles

3.3. Receipt of Revenue /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. Receipts are recorded as a debit to cash at Bank 4103 and a credit to
the appropriate revenue /assistance/ loan account code.

Example:Assume you are the accountant of Ministry of foreign affairs and that
you collected birr 10,000 in fees for visas.

Transaction Register of Ministry of Foreign Affairs:

No Description TB Account Others Cash at Bank
Number 4103
Dr Cr Dr Cr
1 Revenue - 1411 10,000 10,000

Transfer of collections Directly to MOFED

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In some public bodies, revenue collectors make deposits 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.

Example: MOFED receives a deposit from Internal Revenue for Birr 40,000. The
deposit is from the collection of agricultural income tax.

Transaction Register of MOFED:

No Description TB Account Others Cash at bank
Number 4105
Dr Cr Dr Cr
1 Transfer from IR - 4009 40,000 40,000

Transaction Register of Internal Revenue:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Agricultural Revenue 4009 40,000
Transfer 1107 40,000
3.4. Cash 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: 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:Assume a subsidy payment of Birr 300,000 is made to a region by

MOFED where you are an accountant.

Transaction Register of MOFED

No Description TB Account Others Cash at bank
Number 4105
Dr Cr Dr Cr
1 Region subsidy 6411 300,000 300,000

Cash Expenditures: Check Payments by Accountants

Only accountants are allowed to make payments using checks.

53
Example: Assume that an accountant pays by check an amount of Birr 50,000 for
office supplies.

Transaction Register of Public Body:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Office supplies paid in 6212 50,000 50,000
cash

Cash Expenditures: 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. 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 280,000 from its capital expenditure budget.

Transaction Register of MOFED:

No Description TB Accoun Others Cash at bank
t 4105
Number
Dr Cr Dr Cr
1 Transfer to MOH - 4004 280,000 280,000

Transaction Register of Ministry of Health:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Purchase of motor 02 6311 280,00
vehicles 0
Transfer from MOFED - 4004 280,000

Cash Expenditures: 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. There are two processes for opening a letter of credit:
 If the letter of credit is for Birr 50,000 or less, the public body can open the
letter of credit.
 If the letter of credit is for more than Birr 50,000, the public body must
request that MOFED open the letter of credit.

54
Cash Expenditures: 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. 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 30,000.

Transaction Register - Regular Bank Account of Ministry of Health:

No Description TB Accoun Others Cash at bank
t 4103
Number
Dr Cr Dr Cr
1 Purchase of medical 02 6214 30,000 30,000
supplies

Transaction Register - Restricted Bank Account of Ministry of Health:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Letter of credit #xxxx - 5500 30,000 30,000

Cash Expenditures: Letter of Credit: Opened by MOFED on behalf of Public

Body
A Public Body requests that MOFED open a letter of credit on its behalf.

MOFED: 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.

The Public Body: 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.

Example: The Ministry of Health (MOH) requests MOFED to open a letter of

credit on its behalf amounting to Birr 700,000 for motor vehicles from its capital
expenditure budget.

Transaction Register:
No Description TB Account Other Cash at bank
Number 4105
Dr Cr Dr Cr
1 Transfer to - 4054 700,000 700,000
MOH

Transaction Register bank account MOH:

55
 No Description TB Accoun Other Cash at bank
t 4103
Number
Dr Cr Dr Cr
1 Purchase of Motor 02 6311 700,00 700,000
vehicle 0
2 Transfer from MOFED - 4054 700,000

Transaction Register - Restricted Bank Account of Ministry of Health:

No Description TB Accou Other Cash at bank
nt 4103
Numbe
r
Dr Cr Dr Cr
1 Letter of Credit #xxxx - 5531 700,00 700,00
0 0

Cash Expenditures: Cash Payment by Public Body to Region

Occasionally, public Bodies make cash payments to regions.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. 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 Health (MOH) sends Birr 53,000 to a region as part of a
sector development plan.

Transaction Register - Ministry of Health:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Region - 6411 53,000 53,000
Subsidy

Cash Expenditures: Cash Payment 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 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

56
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.

The expenditure account code with a debit for the full purchase price. If the tax is
federal, withholding tax revenue code 1103 or 1104 (depending of 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 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.Cash at bank 4,103 with a credit for the
actual amount paid to the supplier.

Cash Expenditures: 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 200,000
from its recurrent expenditure budget - Birr 198,000 relates to the cost of the office
supplies and Birr 2,000 is the withholding tax.

Transaction #1: Payment effected to supplier

Transaction Register of Public Body:

No Description TB Accoun Others Cash at bank
t 4103
Number
Dr Cr Dr Cr
1 Office supplies 01 6212 200,000
Withholding tax 1104 2,000 198,000
revenue

Transaction #2: Transfer to MOFED

Transaction Register of Public Body:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
2 Transfer to MOFED 4009 2,000 2,000

Transaction Register of MOFED:

No Description TB Accoun Others Cash at bank
t 4105
Number
Dr Cr Dr Cr
1 Transfer to 4009 2,000 2,000
MOFED

57
Cash Expenditures: 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 is transferred to
MOFED. MOFED pays the tax amount to the region. A subsidiary ledger should
be maintained for payable to region 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 200,000 from its recurrent
expenditure budget - Birr 198,000 relates to the cost of the office supplies and Birr
2,000 is the regional withholding tax.

Transaction #1: Payment effected to supplier

Transaction Register of public Body:

No Description TB Accoun Others Cash at bank
t 4103
Number
Dr Cr Dr Cr
1 Office Supplies 01 6212 200,000
Tax payable to 5026 2,000 198,000
Region

Transaction #2: Transfer to MOFED

Transaction Register of Public Body:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
2 Payable to 5026 2,000 2,000
MOFED

Transaction Register of MOFED:

No Description TB Accoun Others Cash at bank
t 4105
Number
Dr Cr Dr Cr
1 Tax payable to 5026 2,000 2,000
region

Transaction #3: MOFED pays tax to region

Transaction Register of MOFED:

No Description TB Account Others Cash at bank
Number 4105
Dr Cr Dr Cr
2 Payable to region 5026 2,000 2,000

Cash Expenditures: Construction Projects

58
The 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 stem, 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.
 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 2,000,000 Birr. Terms of contract
are:
Initial advance of 20% = 400,000 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.
Payment certificate when 80% complete.
Payment certificate when 100% complete.
Transaction #1: payment of 20% advance:
Accountant prepares a check for 400,000 Birr.
Accountant prepares payment Voucher for 400,000 Birr:
Debit to 4251 & Credit to 4103

Transaction Register of public Body:

No Description TB Accoun Others Cash at bank
t 4103
Number
Dr Cr Dr Cr
1 Advance to 4251 400,000 400,000
contractor

Transaction #2: payment certificate when 40% complete.

Accountant Prepares a check for 560,000 Birr as follows:
800,000 payment certificate request
160,000 adjustment to advance
80,000 retention.
Accountant prepares payment Voucher as follows:
Debit to 6323 for 800,000
Credit to 4251 for 160,000
Credit to 5061 for 80,000
Credit to 4103 for 560,000

59
Transaction Register of public Body:
No Description TB Accoun Others Cash at bank
t 4103
Number
Dr Cr Dr Cr
2 Construction - 02 6323 800,000
Building
Advance to 4251 160,000
contractor
Retention on 5061 80,000 560,000
contract

Transaction #3: payment certificate when 80% complete.

Accountant Preparesa check for 560,000 Birr as follows:
800,000 payment certificate request
160,000 adjustment to advance
80,000 retention
Accountant prepares payment voucher as follows:
Debit to 6323 for 800,000
Credit to 4251 for 160,000
Credit to 5061 for 80,000
Credit to 4103 for 560,000
Transaction Register of public Body:
No Description TB Accoun Others Cash at bank
t 4103
Number
Dr Cr Dr Cr
4 Construction - 02 6323 800,000
Building
Advance to 4251 160,000
contractor
Retention on 5061 80,000 560,000
Contract

Transaction #4: payment certificate when 100% complete.

Accountant prepares check for 280,000 Birr as follows:
400,000 payment certificate request
80,000 adjustments to advance
40,000 retention
Accountant prepares payment Voucher as follows:
Debit to 6323 for 400,000
Credit to 4251 for 80,000
Credit to 5061 for 40,000
Credit to 4103 for 280,000

Transaction Register of public Body:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
4 Construction - 02 6323 400,000
Building

60
 Advance to 4251 80,000
contractor
Retention on 5061 40,000 280,000
Contract

Transaction #5: Payment of retention after final approval of project:

Accountant prepares a check for 200,000 Birr.
Accountant prepares payment voucher for 200,000 Birr:
Debit to 5061 & Credit to 4103

Transaction Register of public Body:

No Description TB Accoun Others Cash at bank
t 4103
Number
Dr Cr Dr Cr
5 Retention on 5061 200,000 200,000
contract

3.5. Salary

Public Bodies pay salaries to employees every month. This section describes the
accounting for:
Payment of salary
Unpaid salary
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 coder 4001 and a credit to cash at bank 4105 for the net
salary amount.
 A debit to transfer coder 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. When the public Body receives Ge/Be/We 12/1, the public Body
prepares:
 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

61
 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:Assume the Ministry of Agriculture (MOA) requests salary for the month
of July 2001 with the following details and also assume that you are the
accountant in MOA and MOFED.
Gross salary 40,000
Deduction: salary advance 1,200
Pension expense - 6% 2,400
Penalty for absenteeism 500
Employee pension - 4% 1,600
Net Salary payable 32,700
Income tax 4,000

Transaction Register of MOFED:

No Description TB Account Others Cash at bank
Number 4105
Dr Cr Dr Cr
1 Transfer for 4001 32,700 32,700
MOFED
2 Transfer to PB 4001 4,000 4,000

Transaction Register of MOA:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Transfer to PB 4001 36,700
Pension payable 5003 4,000 32,700
2 Salary Expense 01 6111 40,000
Pension Expense 01 6131 2,400
Salary payable 5004 32,700
Income Tax 1101 4,000
Staff Advance 4203 1,20
0
Fines 1485 500
Pension Payable 5003 4,000

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

62
ledger for salary payable account should be maintained. Each unpaid employee
should be an account in the subsidiary ledger.

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 - 6% 60 Salary Payable
890
Employee pension - 4% 40

Transaction #1: Reverse salary expense

Transaction Register of MOA:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Salary Expense 01 6111 1000
Pension 01 6131 60
Expense
Salary Payable 5004 890
Income Tax 1101 70
Pension Payable 5003 100

Transaction #2: Adjust Pension transfer

Transaction Register of MOA:
No Description TB Accoun Others Cash at bank
t 4103
Number
Dr Cr Dr Cr
2 Transfer - Salary 4001 100
Pension payable 5003 100

Transaction Register of MOFED:

No Description TB Accoun Others Cash at bank
t 4105
Number
Dr Cr Dr Cr
1 Advance to 4210 100
pension
2 Transfer - Salary 4001 100

63
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 - 6% 2,280
Deduction: salary advance 1,200
Employee pension - 4% 1,520
Net Salary payable 31,480

Transaction Register of MOFED:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Transfer to PB 4001 31,480 31,480
2 Transfer to PB 4001 3,800
Advance to 4210 100 3,700
Pension

Transaction Register of MOA:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Transfer to PB 4001 35,280
Pension 5003 3,800 31,480
payable
2 Salary Expense 01 6111 38,000
Pension 01 6131 2280
Expense
Salary payable 5004 31,480
Income Tax 1101 3,800
Staff Advance 4203 1200
Pension 5003 3,800
Payable

3.6. 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.

64
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 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. Advances must be repaid to MOFED or otherwise accounted
for.

Example Prior to receipt of its budget notification, a public Body requests funds
in June to pay recurrent expenditures. MOFED sends Birr 7,000

Transaction Register of MOFED:

No Description TB Accoun Others Cash at
t bank 4105
Number
Dr Cr Dr Cr
1 Advance for 4206 7,000 7,000
Recurrent

Transaction Register of Public Body:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Due to 5024 7,000 7,000
MOFED

When the public Body receives its budget notification, a Ge/Be/We 11/2 is sent to
MOFED for Birr 14,000. This requests includes the 7,000 Birr received as an
advance. MOFED approves the request, reduces the cash transfer by 7,000 Birr,
and transfers Birr 7,000 in cash.

Transaction Register of MOFED:

No Description TB Accoun Others Cash at
t bank 4105
Number
Dr Cr Dr Cr
1 Advance 4206 7,000
Recurrent
Transfer - 4002 14,000 7,000
Recurrent

Transaction Register of Public Body:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Due to MOFED 5024 7,000
Transfer - 4002 14,000 7,000
Recurrent

65
Receivables and Payables: with Employees
Three situations are described here:
 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

Receivables and payables: with Employees: 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 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 2,000 is requested and approved.
MOFED transfers the net amount to the public body after deducting the applicable
interest on the advance amounting to Birr 200.

Transaction #1: cash transfer from MOFED

Transaction Register of MOFED:
No Description TB Account Others Cash at bank
Number 4105
Dr Cr Dr Cr
1 Transfer 4005 1,800 1,800

Transaction Register of Public Body:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Transfer 4005 1,800 1,800

Transaction #2: Payment of Advance

Transaction Register of Public Body:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Staff 4203 2,000
Advance
Interest 1465 200 1,800

Receivables and Payables: With Employees: 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.

66
Transaction Register of Public Body:
No Description TB Accoun Others Cash at
t bank 4103
Number
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.

Transaction Register of Public Body:

No Description TB Account Others Cash at bank 4103
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 10 100
0

Receivables and Payables: With Employees: 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. 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 3,000 in the bank account of a public body to
support the research of an employee.

Transaction #1:Funds are deposited

Transaction Register of Public Body:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Due to staff 5021 3,000 3,000

67
Transaction #2: The employee receives 550 Birr from the fund
Transaction Register of Public Body:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
2 Due to staff 5021 550 550

Receivables and Payables: With Employees: 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 6,000.
Transaction Register of Public Body #1:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
Net 5601 6,000
Asset/Equity
Advance to Staff 4203 6,000

Transaction Register of Public Body #2:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
Advance to Staff 4203 6000
Net 5601 6,000
Asset/Equity

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 and Payables: With Suppliers: 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 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 2,500.

Transaction #1: payment of advance.

Transaction Register of Public Body:

68
 No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Advance to - 4253 500 500
Supplier

Transaction #2: Delivery of supplies.

Transaction Register of Public Body:
No Description TB Accoun Others Cash at
t bank 4103
Number
Dr Cr Dr Cr
1 Office Supplies 01 6212 2,500
Advance to Supplier - 4253 500 2,000

Receivables and Payables: With Suppliers: 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 2,500 on credit
from a supplier. Payment is made after 30 days.
Transaction #1: Receipt of office supplies
Transaction Register of Public Body:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Office Supplies 01 6212 2,500
Sundry creditors 5002 2,500

Transaction #2: Payment is made.

Transaction Register of Public Body:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Sundry - 5002 2,500 2,500
Creditors

Receivables and Payables: With Suppliers: Grace Period Payables

The first 30 days of the fiscal year are called the grace period. 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.

69
Example: 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.

Transaction #1: Provision for grace period payables last year.

Last Year's Transaction Register of Public Body:
No Description TB Account Others Cash at bank
Number 4105
Dr Cr Dr Cr
1 Office supplies 02 6212 12,000
Grace period 5001 12,000
payables

Transaction #2: Transfer of funds for grace period payables this year.
This year's Transaction Register MOFED:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Transfer - - 4007 12,000 12,000
GPP

This year's Transaction Register of Public Body:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Transfer - GPP - 4007 12,000 12,000

Transaction #3: Payment of grace period payables this year.

This year's Transaction Register of Public Body:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Grace period payables 5001 12,000 12,000

Receivables and Payables: with Regions

Occasionally, public Bodies make cash payments to regions. Payments to the
regions from the federal level are budgeted as part of the region's subsidy. The
public Body should record the payment as a subsidy payment. A rare exception
occurs when the funds are part of the approved budget for the public Body and in
this rare case, the item of expenditure is part of the approved budget for the public
body, the region is simply action as a purchasing agent for the ministry. The
responsibility for the budgeted expenditure cash remains with the public body,
although the expenditure is executed in the regional since a settling of the funds is
expected, the transaction is recorded as a receivable By MOE at Federal level.

70
Example: The Ministry of Education (MOE) sends Birr 55,000 to Amhara Regional
Education Bureau (AREB). The Amhara Regional Education Bureau returns
invoices for the book totaling Birr 47,000 and cash totaling Birr 8,000 to the
Ministry of Education.

Transaction #1: Cash is sent to AREB

Transaction Register MoE:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Advance to - 4208 55,000 55,000
region

Transaction #2: Cash and invoices are received from AREB.

Transaction Register of MOE:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Books 02 6215 47,000
Advance to 4208 55,00 8,000
region 0

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.

Receivable and Payables: Deposits: Receipt and Return of Deposit

Example: A public body collects a deposit of Birr 40,000 as bid security. The bid
is unsuccessful and the deposit is returned at a later date.

Transaction #1: Receipt of Deposit.

Transaction Register of Public Body:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Bid security Deposit - 5054 40,000 40,000

Transaction #2: Refund of Deposit.

Transaction Register of Public Body:

71
 No Description TB Accoun Other Cash at bank
t 4103
Number
Dr Cr Dr Cr
1 Bid Security - 5054 40,000 40,000
Deposit

Receivables and payables: Deposits: Deposits kept in separate Bank

Account
If a bank account is maintained for deposits only, there is no need to keep a
transaction register for the bank account. A detailed record of each deposit must
be maintained, but the form of the record can be cashbook with subsidiary records
for each deposit.

Monthly, the cash balance in the cashbook must be reconciled with the bank
account's bank statement and with the detailed subsidiary records. After
reconciliation, the corrected deposit amount must equal the cash balance in bank.
This amount should be entered in the transaction register of the public body as
follows:
 The deposit account code should be debited and cash in bank 4103
credited for the current balance in the deposit account. After this entry, the
balance in the deposit account is zero.
 Cash in bank 4103 should be debited and the deposit account code should
be credited for the corrected deposit amount at the end of the current
month.

These should be the only accounting entries in the public body's transaction
register that involves the deposit account. No subsidiary ledger is necessary; the
detailed subsidiary records for the cashbook services as the subsidiary ledger.

Example: The balance per the General Ledger in deposit account code 5051 is
Birr 400,000. The deposit bank account is reconciled to the detailed subsidiary
records and the corrected balance is Birr 600,000

Transaction #1: Set deposit account balance to zero.

Transaction Register of Customs:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Customs - 5051 400,000 400,000
Deposit

Transaction #2: Record corrected deposit.

Transaction Register of the public Body:
No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Customs Deposit - 5051 600,000 600,000

3.7 Aid in Kind

72
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.

Example: 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 200,000
from USAID under the capital expenditure budget for project code 2356.

Transaction Register of the public Body:

No Description TB Account Others Cash at bank
Number 4103
Dr Cr Dr Cr
1 Motor vehicles 02 6311 200,000
Assistance 2084 200,000

All aid in kind entries are recorded in local currency only.

3.8 Financial Document Transmittal Voucher: Me/He

Me/He is the document prepared as evidence for the transfer of financial

documents, such as expenditure vouchers, between responsible persons in the
accounting system.The purpose of the Financial Document Transmittal Voucher is
to record the transfer of financial documents from one responsible party to
another.

Preparation and Source Documents: Whoever is receiving financial documents

prepares the Financial Document Transmittal voucher.The format of the Financial
Document Transmittal voucher is shown in Figure 3.1

73
 Figure 3.1: Financial Document Transmittal Voucher
Model 42 Serial No.
Date
THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA
MINISTRY OF FINANCE & ECONOMIC DEVELOPMENT
FINANCIAL DOCUMENT TRANSMITTAL VOUCHER
No Date Descriptio Reference Reference Amount No. of Remar
n Type No Attachments k

Total
I have received the documents listed above from on the _____________days of the month
year and issued .

Transferred by: Name and Signature Received: Name and Signature

Original -to-Transferor, second copy to Receiver

74
3.9 Public Bodies who receive No Treasury Funds

Some public bodies receive no funds from treasury. Instead, their entire budget is
financed by revenue that they collect and retain. However, their reports may be
submitted quarterly rather than monthly.

3.10 Closing Entry

As discussed in Module two of this course, special routines are required at the end of
the fiscal year to maintain general and subsidiary ledgers. Specifically, entries must be
recorded in every general and subsidiary ledger at the end of the year after the last
monthly report is prepared and sent to MOFED. These are called closing entries which
must be recorded in every general and subsidiary ledgers at the end of the year after
the last monthly report is prepared and sent to MOFED. These are called closing
entries. Closing entries also is required in MOFED's general and subsidiary ledgers
after the annual accounts are closed.

The purpose of closing entries is to set all temporary accounts in the general ledger,
and all related subsidiary accounts, to zero. Temporary accounts are:
 Revenue /Assistance/ Loan account codes 1000 - 3999.
 Transfer account codes 4000 - 4099.
 Expenditure account codes 6000 - 6999.

The procedures for making the closing entry are:

1. To prepare the last monthly report for the fiscal year and submit the report to
MOFED. If the transfer was sent from MOFED during the fiscal year, it should
be recorded in that fiscal year and not when the cash is received.
2. After the last monthly report for the fiscal year is accepted by MOFED, to record
thefollowing entry in the transaction register of the bank account from Me/He 27
trialbalance:

A. From the line from Revenue /Assistance / Loan:

 Record a debit in the transaction register for any amount that is a credit on
this line in Me/He 27.
 Record a credit in the transaction register for any amount that is a debit on
this line in Me/He 27.
B. From the line for Recurrent Expenditure:
 Record a debit in the transaction register for any amount that is a credit on
this line in Me/He 27.
 Record a credit in the transaction register for any amount that is a debit on
this line in Me/He 27.
C. From the line for capital expenditure:
 Record a debit in the transaction register for any amount that is a credit on
this line in Me/He 27.
 Record a credit in the transaction register for any amount that is a debit on
this line in Me/He 27.

29
D. From the line for Transfers:
 Record a debit in the transaction register for any amount that is a credit on
this line in Me/He 27.
 Record a credit in the transaction register for any amount that is a debit on
this line in Me/He 27.
E. In net asset/equity account code 5601 records the appropriate amount as a debit
or a credit to make the entry balance.
 To enter the amount for net asset/equity on the net asset/equity account
code 5601 ledger card in the general ledger; this account should have no
subsidiary ledger.
3. To remove from the general ledgers all general ledger cards for account codes:
a. revenue/assistance/ loan account codes 1000 – 3999
b. transfer account codes 4000 – 6999
c. expenditure account codes 6000 - 6999
4. To remove all subsidiary ledger cards associated with account codes
a. Revenue/Assistance/ Loan account codes 1000 – 3999
b. Transfer account codes 4000 – 6999
c. Expenditure account codes 6000 – 6999
5. To store all general, subsidiary and budget ledger cards that are removed in a
file. The file should be appropriately labeled as ledger cards for the fiscal year.

A closing entry must be made in all general and subsidiary ledgers. If there is an
internal bank account that maintains general and/or subsidiary ledgers, the
closing entry is as follows:
 If the internal bank account is treated as a safe, no closing entry is
necessary.
 If the bank account holds deposits only, no closing entry is necessary.
 If the bank account is for non - budgetary funds that are not reported to
MOFED, no closing entry is necessary.
 If a transaction register is maintained for the bank account, but the
transaction register is recorded in a general ledger (with subsidiary
ledgers) that is maintained by the public Body, no closing entry is
necessary.
 If the bank account is an accounting unit with its own general and/or
subsidiary ledger, a closing entry is necessary.
 If a monthly report is prepared and sent to the public body, follow the
instructions given above.
 If a monthly report is not prepared, the amounts for the closing entry
(revenue/assistance/loan, Transfer, and expenditure) should be taken
calculated by totaling balances on the corresponding general ledger cards.
The closing entry should be the opposite of the ledger card balance (if the
ledger card balance is a debit, the closing entry should be a credit; if the
ledger card balance is a credit, the closing entry should be a debit).
Each year must begin with a zero balance in all general and subsidiary ledger
cards for account codes:

30
  Revenue/Assistance/Loan account codes 1000 - 3999.
 Transfer account codes 4000 - 4099.
 Expenditure account codes carry forward from the end of the fiscal year to
the balances in all other account codes carry forward from the end of one
fiscal year to the beginning of the next fiscal year.

Example:Assume a Public body in which you are working as an accountant prepares its
final Me/He 27, which is the trial balance for the fiscal year. The final report is accepted
by MOFED.

The next hypothetical activity will give you a hint on how the final Me/He 27 is prepared
in part.
Account Account Description Debit Credit
Code
-- Revenue/Assistance/Loan: 1,200,509
-- Expenditure:
-- Recurrent expenditure: 2,680,832
-- Capital Expenditure: 6,377,142
-- Transfers: 2,031,491, 9,703,216

Note that revenue/assistance/loan account balances typically are credits, expenditure

account balances are typically debits, but transfer account balances can be debits or
credits depending on the direction of the transfer.

Also during the period of preparation of closing entry, the following has to be done by
you.
Transaction Register of the public Body:
N Description TB Account Others Cash at
o Number bank 4103
Dr Cr Dr Cr
1 Closing Entry: --
Revenue/Assistance/Loan -- 1,200,509
Recurrent expenditure -- 2,680,832
Capital Expenditure -- 6,377,142
Transfers -- 9,703,216 2,013,491
Net Assets/Equity 5601 167,740

You have to remove all ledger cards from its general and subsidiary ledgers that have
account codes 1000 - 3999, 4000 - 4099, and 6000 - 6999. The cards are labeled and
filed in storage. You have to record a debit of 167,740 in net asset/equity ledger card
account code 5601.

31
3.11 Beginning of Year Procedures

According to MOFED and DSA Project manual, December 2002, special procedures
are required: Before accounting for a new fiscal year can begin, and immediately after
the beginning of a new fiscal year.

These special procedures are:

 Opening new ledger cards,
 Recording cash and stock, and
 Procedures at MOFED.
These beginning of year procedures are described here.
Beginning of Year Procedures: Ledger Cards

A set of budget and general ledger cards should be prepared at the beginning of each
fiscal year.

Budget Ledger Cards

Budget ledger cards are valid only for the budget year to which they relate. When
budget notification is received, budget ledger cards should be prepared for each item of
expenditure for each budgetary Institution. The prior year's budget ledger cards should
be filed

General Ledger Cards

General ledger cards for the following account codes are closed at the end of the fiscal
year:
 Revenue/Assistance/Loan account codes 1000 – 3999
 Transfer account codes 4000 – 4099
 Expenditure account codes 6000 - 6999
Closing an account means:
 Setting the account's balance to zero, and
 Filing the account's ledger card'

Balances in all other accounts carry forward to the next fiscal year. However, keeping
the same ledger card may be awkward, since the number of cards becomes bulky. The
public body should begin a new fiscal year by preparing new general ledger cards for all
accounts that have carry forward balances. The beginning balance (equal to last year's
ending balance) should be recorded on each card. Last year's general ledger cards
should be filed with the ledger cards of accounts that were closed

Example: If a public Body request Birr 100,000 from MOFED. Then the MOFED
transfers only Birr 90,000 assuming that the public Body had Birr 10,000 as opening
balance. At the same time, a recording is made as if the ending cash balance was
transferred back to MOFED as shown hereunder.

32
Transaction Register of MOFED:
Transaction Register of the Public Body:
No. Description TB Account Other Cash at Bank
Number 4105
Dr Cr Dr
1. Cash transfer - 4002 90,00
0
Non- Cash transfer - 4052 10,00
0
Non- Cash transfer - 4055 10,000 90,000

Transaction Register of the Public Body:

No. Description TB Account Other
Number
Dr Cr Dr
1. Non-Cash transfer - 4055 10,000
Non- Cash transfer - 4052 10,000
Cash transfer - 4002 90,000 90,000
Subsidiary Ledger Cards
Subsidiary ledger cards for closed general ledger accounts should be filed with the
general ledger cards. Subsidiary ledger accounts and related general ledger accounts
also are considered closed. Balances in all other subsidiary accounts carry forward to
the next fiscal year. Unless the number of cards for a particular subsidiary account
becomes bulky, last year's cards can continue to be used in the following year. If the
public body chooses to begin a new fiscal year by preparing new subsidiary ledger
cards, the balance for each subsidiary account carries forward. The beginning balance
(equal to last year's ending balance) should be recorded on each card. Any subsidiary
ledger cards that are replaced should be filed with the ledger cards of accounts that
were closed.

Beginning of Year Procedures Opening Balances

After the last day of the fiscal year, the cash and stock balances at public Bodies are
sealed until Inspectors can verify the balances. MOFED applies the cash and stock
balances against the future requests, as indicated on Ge/Be/We 11/2 or Ge/Be/we 11/3.

Cash Opening Balances

The ending balance in cash in safe and cash in bank at a public body must be
transferred to MOFED at the end of the fiscal year. However, the public body needs
cash transferred to it for the new fiscal year. Rather than moving cash back and forth,
the transfers are handled as non-cash transfers. MOFED deducts the opening balance
of cash in safe and cash in bank from the amount of budgeted cash to be transferred to
the public body. This deduction is made on Ge/Be/We 11/2 or Ge/Be/We 11/3 and is
handled as a non-cash transfer by MOFED and by the public Body. At the same time, a
recording is made as if the ending cash balance was transferred back to MOFED.

33
Example: Assume a public Body requests Birr 200,000 from MOFED. MOFED transfers
Birr 190,000 because the public Body has Birr 10,000 as opening balances.

Transaction Register of MOFED:

No Description TB Accoun Others Cash at bank
t 4105
Number
Dr Cr Dr Cr
1 Cash transfer - 4002 190,000
Non-cash - 4052 10,000
transfer
Non-cash - 4055 10,000 190,000
transfer

Transaction Register of the public Body:

No Description TB Accou Others Cash at bank
nt 4103
Numbe
r
Dr Cr Dr Cr
1 Non-cash - 4055 10,000
transfer
Non-cash - 4052 10,00
transfer 0
Cash transfer 4002 190,0 190,0
00 00

Stock Opening Balances

The ending balance in stock at a public body is charged as reduction to the next year's
budget. The reduction is treated as a non-cash transfer and as a reduction to the
amount of cash that can be requested and committed for a particular budgeted item.

The amount of the ending stock also should be recorded in the transaction register at
MOFED as a debit to non-cash transfer for recurrent expenditure account code 4052
and a credit to other non-cash transfers account code 4055. In its Transaction Register,
the public Body records a debit to other non-cash transfers account code 4055 and a
credit to not - cash transfer for recurrent expenditure account code 4052.

Example: Assume inspectors report Birr 145,000 in stock remaining at a Public Body at
the end of the year. A Public Body requests Birr 200,000 from MOFED. MOFED
transfers Birr 55,000 because the public Body has Birr 145,000 as opening stock
balance. And also further assume that you are an accountant of both MOFED and the
public body.

34
Transaction Register of MOFED
No Description TB Account Others Cash at
Number bank 4105
Dr Cr Dr Cr
1 Cash transfer - 4002 55,00
Non - cash - 4052 145,0
transfer 00
Non - cash - 4055 145,0 55,000
transfer 00

Transaction Register of Public Body:

No Description TB Account Others Cash at
Number bank 4103
Dr Cr Dr Cr
1 Non - cash - 4055 145,000
transfer
Non - cash - 4052 145,00
transfer 0
Cash transfer - 4002 55,00 55,00
0

In the appropriate stock item's budget ledger card, in the "payment receive" and
"commitment" columns, Birr 145,000 is recorded.

Beginning of Year Procedures at MOFED

In here also, special Procedures are required at MOFED before the accounting for a
new fiscal year can begin. These special procedures include updating for changes to:
the budget, budget codes and account codes. In particular, MEFED must input or
update in the budget/disbursement/accounts program:
1. Budget identification codes for all public Bodies.
2. Budget identification codes for all reporting Entities.
3. The Chart of Accounts for any changes to:
Item of Expenditure
Items of Revenue
Transfers
Assets
Liabilities
4. Annual appropriated budget.

35
2.12 Cashier Functions

Cashier Functions: Cash Withdrawn from Bank to Safe

The accountant writes a check to the cashier to put cash in the transaction register and
the cashier records the bank payment voucher in the petty cashbook as a debit to cash.

Example: A check for Birr 3,000 is written to the cashier for petty cash.

Transaction Register of public Body:

No Description TB Accou Cash at Cash in
nt bank 4103 safe 4101
Numbe
r
Dr Cr Dr Cr
1 Cash withdrawn from - - 3,000 3,000
safe

Cashier Functions: Cash deposited in to bank from the safe

The cashier transfers cash from the safe to the bank by depositing the cash in the bank.
The cashier brings the bank deposit slip to the accountant who prepares a receipt
voucher. The accountant records the receipt voucher in the transaction register and the
cashier records the receipt voucher in the receipt cashbook as a credit to cash.

Example: The Cashier deposits Birr 20,000 in the bank.

Transaction Register of Public Body:
No Description TB Accou Cash in Cash at bank
nt Safe 4101 4103
Numbe
r
Dr Cr Dr Cr
1 Cash deposited in to - - 20,000 20,000Cashier
bank
Functions: Cash and Check Receipts by Cashier
When a cashier receives currency of checks, a receipt voucher is issued. The cashier
records the receipt voucher in the receipt cashbook as a receipt of cash. At the end of
the day, the cashier deposits the cash and checks in the bank and brings all receipt
vouchers and the bank deposit slip to the accountant. The accountant issues a receipt
voucher to the Cahier. The accountant records each receipt voucher in the transaction
register and the cashier records the receipt voucher from the accountant in the receipt
cashbook.

Example: Assume that a Cashier receives a total of Birr 2,000 on the same day. Birr
1,000 in cash is a return of an advance by a staff member, and Birr 1,000 in check is a
court deposit. The Cashier records the receipts in the Receipts Cash Book and deposits
the Birr 2,000 in the bank at the end of the day. The bank deposit slip and Receipt

36
Vouchers are provided to the Accountant. The Accountant issues a Receipt Voucher to
the Cashier.

Transaction Register of Public Body

No Description TB Accou Others Cash at Cash in Safe
nt bank 4103 4101
Numbe
r
Dr Cr Dr Cr Dr Cr
1 Staff Advance - 4203 1,000 1,000
2 Deposit - 5052 1,000 1,000
3 Cash deposited 2,000 2,00
in to bank 0

Cashier Functions: Cash Imprest Payments to Cashier by Accountant

Each public body should establish the amount of cash to hold in petty cash. The cashier
makes cash payment from the impress fund using cash payment vouchers. When the
petty cash balance is low, the cashier submits the cash payment vouchers to the
accountant. The accountant writes a check to the cashier for the payment vouchers to
the Accountant. The Accountant writes a check to the cashier for the total amount of the
cash payment voucher. The accountant records each cash document for the check is
bank payment voucher in the transaction register. The cashier records the bank
payment voucher from the accountant in the petty cash book as a debit to cash.

Example: The Accountant pays the cashier Birr 4,000 by check using a bank payment
voucher to replenish the petty cash from a cash payment voucher from the cashier for
Birr 4,000 paid to an employee for per diem. The cashier records the receipt in the petty
Cashbook. The accountant records the cash and bank payment vouchers in the
transaction register as follows:

Transaction Register of Public Body:

No Description TB Accou Others Cash at bank Cash in Safe
nt 4103 4101
Numbe
r
Dr Cr Dr Cr Dr Cr
1 Per Diem 01 6231 4,000 4,00
0
2 Cash to 4,000 4,000
Cashier

37
 Unit 4
Monthly Reports
Introduction
The purpose of this unit is to describe the monthly reports submitted by a reporting
entity to ministry of finance and Economic development. The reports are highly
interrelated. The first section of this unit deals with Revenue /Assistance/ Loan report
which is prepared to provide information on the year to date revenues of an accounting
unit from each source of finance. It also helps to facilitate consolidation of the actual
revenues, assistance and loan collected by the FGE and to facilitate comparison of
budgeted revenues to actual revenues by account category. The second and third
section of this unit deals with Recurrent Expenditure Report, Capital Expenditure Report
respectively and these reports provide information on the year - to - date expenditures
of each BI managed by an accounting unit. Its function is to facilitate consolidation of
the actual expenditures made by the FGE and to facilitate comparison of budgeted
expenditure to actual expenditure.

The fourth section of this unit will describe about Transfer Report whose function is to
serve as a control tool to verify case transfers between MOFED and an accounting unit
and vice versa. The fifth section of this unit deals with Receivables Report, which
provides information on the year - to_ date receivables owed to an accounting unit. This
report helps to facilitate consolidations of the actual receivables owed to the FGE.

The sixth section of this unit will present about the Payables Report. The payables
report provides information on the year-to-date payables owed by an accounting unit.
This report facilitates consolidation of the actual payables owed by the FGE. The total of
all the revenue/Assistance/loan reports, recurrent and capital expenditure reports,
receivables and payables reports will be carried forward to the trial balance.

The seventh section of this unit is about a trial balance, which is the summary of the net
cumulative year -to - date 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. It
proves the arithmetical accuracy of the general ledger. The total amount of debit column
must be equal with the total amount of the credit column in the trial balance. The trial
balance serves as a basis to produce financial statements. Finally, the last section of
this unit is about submitting monthly reports to MOFED. This is about the importance of
submitting monthly reports on a timely basis to MOFED by a reporting entity so that

38
Ministry of Finance and Economic Development consolidates the reports for each
account in to a FGE financial statement. The consolidation is done by central accounts
department at MOFED.
After studying this unit, you should be able to:
Prepare Revenue /Assistance/ Loan report;
Prepare recurrent expenditure report;
Prepare capital expenditure report;
Prepare transfer report;
Prepare receivables report;
Prepare payables report; and
Organize necessary data to complete the monthly reports from documents made
available.
1.1 Revenue/Assistance/Loan Report
According to MOFED and DSA Project manual, December 2002, the only monthly
reports verified by Ministry of Finance and Economic Development are 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 Ministry of Finance and Economic Development are accounted for
within the accounting system to enhance control over cash transfers.

The Trial Balance is verified by Ministry of Finance and Economic Development to

ensure that the total debits and credits are equal and that general Ledgers are
balanced. Also, Ministry of Finance and Economic Development 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. 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

39
Revenue/Assistance/Loan Report are normally credits. Each accounting Unit prepares
one revenue/assistance/Loan Report as indicated in figure 1.1 below.

Figure 1.1: 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:_______________________
Accoun YEAR-TO-DATE
t 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)

Activity 1: preparing revenue/assistance/Loan Report

Allow about 3 minutes.
This activity is meant to enable you to prepare Revenue/Assistance/Loan Report.

You are provided with the following general ledger balances as at May 31, 2004 for
Ethiopian Civil Service College with budget category 319/01/07/00/000/1800 and bank
account 10645839.Further, assume also that you are the accountant of the college.

40
 Account General Ledger
Code Debit Credit
1101 6750
1415 750
1429 1000
1485 500
4001 57550
4002 33450
4005 9600
4009 2750
4055 6750
4101 22850
4103 3100
4203 9600
5004 19850
611 67500
6131 4050
6213 7000
6217 15000
6241 1950
6257 1200
6258 600
6259 600

Required: Based on the above data, you are required to prepare the monthly reports for
the month of May, 2004 except capital expenditure and transfer report part II. Begin with
the preparation of revenue/assistance/loan report for activity1.
Feedback:

41
Revenue/Assistance/Loan report
Me/He 21
Month __May ________
Name of Public Body:___ ECSC________________ code: __319_____
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:___10645839____________________

Accoun YEAR-TO-DATE
t Code Account description Revenue
Debit Credit
1101 Tax on wages and salaries 6750
1415 Court fees 750
1429 Other fees and charges 1000
1465 Interest on loans to government employees
1485 Other miscellaneous revenue 500
Total (To Trial Balance) 9000

Prepared by Name and Signature

1.2. Recurrent Expenditure Report

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 below

42
Figure 1.2: Recurrent Expenditure Report
Me/He 22
Month___________
Name of Public Body:________________________ code: _______
Name of Program:___________________________ code: _______
Name of Sub Agency:________________________ code: _______
Name of Sub Program:________________________code: _______
Name of Project:_____________________________code: _______
Source of Finance:____________________________ code: _______
Bank Account Number:___ ____________________
Account YEAR-TO-DATE
Code Account Description Expenditure
Debit Credit
Preprinted Preprinted

Total (To Trial Balance)

Prepared by Name an Signature

(Source: MOFED and DSA Project, December 2002)

Activity 2: preparing Recurrent Expenditure Report.

Allow about 40 minutes.

The purpose of this activity is to give you a high light on the fields in the recurrent
expenditure report.

Based on the data given on Activity 1, prepare the Recurrent Expenditure report
Feedback:

43
 Recurrent Expenditure Report
Me/He 22
Month___May________
Name of Public Body:____ECSC____________________ code: __319_____
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: _1800______
Bank Account Number:___10645839____________________

Account YEAR-TO-DATE
Code Account Description Expenditure
Debit Credit
6111 Salary to permanent staff 67500
6131 Gov’t contribution to perm. Staff-
4050
pension
6241 Maintenance and repair of vehicles 1950
6257 Electricity charges 1200
6213 Printing 7000
6258 Telecommunication charges 600
6259 Water and other utilities 600
6217 Fuel and lubricants 15000
Total (To Trial Balance) 9790
0

Prepared by Name an Signature

1.3 Capital Expenditure Report

In Manual 3 volume I, Accounting for modified cash basis transactions, which is
prepared by MOFED &DSA Project, in December 2002, the Capital expenditure Report,
provides information on the year-to-date capital expenditures 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 recurrent expenditure Report. Balances in the

44
Capital Expenditure Report are normally debits, 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 1.3: Capital Expenditure Report

Me/He 23
Month___________
Name of Public Body:________________________ code: _______
Name of Program:___________________________ code: _______
Name of Sub Agency:________________________ code: _______
Name of Sub Program: ________________________code: _______
Name of Project: _____________________________code: _______
Source of Finance:____________________________ code: _______
Bank Account Number:_______________________

Account YEAR-TO-DATE
Code Account Description Expenditure
Debit Credit
Preprinted Preprinted

Total (To Trial Balance)

Prepared by Name and Signature

(Source: MOFED and DSA Project manual, December 2002)
1.4 Transfer 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 Ministry of Finance and Economic Development 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

45
The amount from the Balance Column in the General Ledger Card is transcribed into
the transfer report - Part 1as indicated in figure 1.4. The grand totals from each Transfer
report - Part 1 are carried forward to the trial Balance.

Figure 1.4 Transfer Report - Part 1

Me/He 24
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:_______________________
Accoun YEAR-TO-DATE
t 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
Total (To Trial Balance)

Prepared by Name and Signature

(Source: MOFED AND DSA project, December 2002)

Activity 3: Preparing Transfer Report Part I.

Allow about 15 minutes.
The purpose of this activity is to enable you to prepare the Transfer Report Part I.

46
 Based on the data given in Activity 1, you are required to prepare the Transfer Report
Part I.
Feedback:

Transfer Report - Part 1

Me/He 24
Month___May_______
Name of Public Body:____ECSC________________ code: _319______
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:___10645839____________________
Accoun YEAR-TO-DATE
t Code Account Description Balance
Debit Credit
4001 Recurrent salary and allowances 57550
4002 Recurrent operating expenditure 33450
4003 Capital salary and allowances
4004 Capital expenditure
4005 Staff advances 9600
4006 SSDP funds
4007 Grace period payables
4008 Between BI and/or Region
4009 Other cash transfers 2750
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 6750
Total (To Trial Balance) 2750 107350

Prepared by Name and Signature

Part 2
Each cash transfer during the month between the accounting Unit and Ministry of
Finance and Economic Development 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

47
 4003: capital salary and allowances
4004: capital expenditure
4005: Staff advances
4006: SSDP funds
4007: Grace period payables
Any other transfer code used during the month to transfer Funds to /from MOFED

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 Ministry of Finance and Economic Development
are credits. Transfers of cash to Ministry of Finance and Economic Development 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 manual,
January 2002).
Transfer Report - Part 2 is shown in Figure 1.5

Figure 1.5: Transfer Report - Part 2

Me/He 24

4001 4002 4003 4004

D De Cre Dat De Cre Da De Cre Da De Cre
at bit dit e bit dit te bit dit te bit dit
e

Total
Net
activity

48
BOM
Balance
EOM
Balance

Figure 1.5 (Continued)

4005 4006 4007
Da De Cre Dat De Cre Da De Cre Da De Cre
te bit dit e bit dit te bit dit te bit dit

Total
Net
activity
BOM
Balance
EOM
Balance

(Source: MOFED AND DSA Project, January 2002)

1.5. 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 1.6 Receivables Repo

49
Figure 1.6: Receivables Report
Me/He 25
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:_______________________
Accoun YEAR-TO-DATE
t 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
4254 Other advances outside government
4271 Peasant associations
4272 Cooperatives
4273 Individuals and private organizations
4274 Others
Total (To Trial Balance)

Prepared by Name and Signature

(Source: MOFED and DSA Project Manual, January 2002)
Activity 4: Preparing Receivable Report.

50
Allow about 5 minutes.
The objective of this activity is to help you to prepare receivable Report.
Based on the data provided in Activity I, you are required to prepare receivable report.
Feedback:

Receivables Report
Me/He 25
Month__May________
Name of Public Body: _________ECSC_____________ code: _319______
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:___10645839____________________

Accoun YEAR-TO-DATE
t Code Account Description Receivables
Debit Credit
4201 Suspense
4202 Cash shortage
4203 Advance to staff 9600
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
4254 Other advances outside government
4271 Peasant associations
4272 Cooperatives
4273 Individuals and private organizations
4274 Others
Total (To Trial Balance) 9600

51
 Prepared by Name and Signature

1.6. 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).

Figure 1.7: 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-
Account Account Description DATE
Code Payables
Debit Credit
5001 Grace period payables
5002 Sundry creditors
5003 Pension contribution payable
5004 Salary payable
5021 Due to staff
5022 Due to Ministry of Finance and Economic Development for
SSDP
5023 Due to Ministry of Finance and Economic Development for
staff from next year’s budget
5024 Due to Ministry of Finance and Economic Development for
recurrent expenditures from next year’s budget
5025 Due to Ministry of Finance and Economic Development for
capital expenditures from next year’s budget
5026 Due to regions
5027 Other payables to Ministry of Finance and Economic
Development
5028 Other payables within government
5051 Custom deposits
5052 Court deposits
52
5053 Hospital deposits
5054 Other deposits
5061 Retention on contract
Total (To Trial Balance)
Prepared by Name and Signature
(Source: MOFED and DSA Project, December 2002)

Activity 5: Preparing Payables Report

Allow about 4 minutes.
The activity is prepared to help you prepare the Payables Report.
Based on the information given in Activity 1, you are required to prepare the Payables
report.
Feedback:

Payables Report
Me/He 26
Month__May_________
Name of Public Body: ______ECSC_________Code: _319____
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_____10645839_____
YEAR-TO-
Account Account Description DATE
Code Payables
Debit Credit
5001 Grace period payables
5002 Sundry creditors
5003 Pension contribution payable
5004 Salary payable 19850
5021 Due to staff
5022 Due to Ministry of Finance and Economic Development for
SSDP
5023 Due to Ministry of Finance and Economic Development for
staff from next year’s budget
5024 Due to Ministry of Finance and Economic Development for
recurrent expenditures from next year’s budget
5025 Due to Ministry of Finance and Economic Development for
capital expenditures from next year’s budget
5026 Due to regions
5027 Other payables to Ministry of Finance and Economic
Development
5028 Other payables within government
5051 Custom deposits

53
5052 Court deposits
5053 Hospital deposits
5054 Other deposits
5061 Retention on contract
Total (To Trial Balance) 19850

Prepared by Name and Signature

1.7. 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,
Recurrent Expenditure Report,
Capital Expenditure Report,
Transfer Report,
Receivables Report,
Payable Report, and
The General Ledger.

Please note that in profit-making organizations, trial balances are prepared directly form
the general ledger accounts and each account will be listed in the trial balance as long
as it has a balance. However, in FGE system of accounting, 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.

54
Figure 1.8: 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 Credi

t
- 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)

5601 Net Assets/Equity (from General Ledger)

Cash and Cash Equivalents (by account code-from

General Ledger)
4101 Cash on hand
4102 Cash at bank in foreign currency
4103 Cash at bank
TOTAL

Prepared by Name & Sig. Checked by Name & Sig.

Authorized by Name & Sig.
(Source: MOFED and DSA ProjectDecember, 2002)

55
Activity 6: Preparing Monthly Trial Balance.
Allow about 10 minutes.
The intent of this activity is to make you familiar with the preparation of the monthly trial
balance.
Based on the data given in activity 1, you are required to prepare the monthly trial
balance.

Feedback:
Trail Balance
Me/He 27
Month_ May_______
Name of Public Body: ____ECSC___________Code: __319____
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 __10645839_________________
Code Account Description Debit Credit
Revenues/Assistance/Loan: (from 9000
Revenue/Assistance/Loan report
Expenditures:
Recurrent expenditure (Total of Recurrent Expenditure 97900
Reports)
Capital expenditure (Total of Capital Expenditure Reports)
Transfers: (from Transfer Report) 2750 107350
Receivables: (from Receivables Report) 9600
Payables: (from Payables Report) 19850
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 22850
4102 Cash at bank in foreign currency
4103 Cash at bank 3100
TOTAL 136200 136200

Prepared by Name & Sig. Checked by Name & Sig.

Authorized by Name & Sig.

1.8. Submitting Monthly Reports to the Ministry of Finance and Economic

Development
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
56
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.

Activity 7: Importance of reporting on time.

Allow about 5 minutes.
This activity is to show you the importance of reporting on time.
Assume that you are a finance section head in a reporting entity. Your section has to
submit its monthly report to MOFED during the third week after the end of the month.
On one hand, your section did not finish recording transactions of Hamle to Nehassie
20. On the other hand, your organization wants to get funds from MOFED for operating
expenditures. Do you decide to delay and complete the report or submit the report on
the deadline based on what is recorded?

Feedback: The 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.

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.

57
 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.

CHAPTER 5
FINANCIAL STATEMENTS

The financial statements presented 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 can produce 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

58
 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.

The remainder of this chapter describes the format of each financial statement.

59
 GOVERNMENT OF ETHIOPIA

Statement of Financial Position

As at 7 July 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

GOVERNMENT OF ETHIOPIA
Statement of Financial Performance
For the year ended 7 July 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

60
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

GOVERNMENT OF ETHIOPIA
Statement of Changes in Net Assets/Equity
For the year ended 7 July 20X2

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

61
Balance as at 7 July 20X2 0

GOVERNMENT OF ETHIOPIA
Cash Flow Statement
For the year ended 7 July 20X2
Ethiopian Birr '000 20X2 20X1
1 CASH FLOW FROM OPERATING 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
2 CASH FLOW FROM INVESTING 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

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 GOVERNMENT OF ETHIOPIA
Cash Flow Statement
For the year ended 7 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

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