Chapter Four

MONTHLY REPORTS
 Revenue/Assistance/Loan Report
2

 According to MOFED manual, 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.

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 Revenue/Assistance/Loan Report
3

 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.

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 Revenue/Assistance/Loan Report
4

 The Accountant prepares a revenue/Assistance/Loan report

for the Accounting Unit.
 The source document to prepare the revenue/Assistance/Loan
report is the general Ledger.
 Each item of revenue, assistance or loan is identified by
account code.
 The amount from the balance column in the general ledger
card is transcribed into the revenue/assistance/Loan Report.
 The grand totals from each revenue/Assistance/Loan report
are carried forward to the trial Balance.
 Balances in the Revenue/Assistance/Loan Report are
normally credits.
 Each accounting Unit prepares one revenue/assistance/Loan
Report as indicated in figure 1.1 below.

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 5

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:_______________________

Account YEAR-TO-DATE
Code Account description Revenue
Debit Credit
1101 Tax on wages and salaries
1465 Interest on loans to government employees
1485 Other miscellaneous revenue

Total (To Trial Balance)

Prepared by Name and Signature

 Revenue/Assistance/Loan Report
6

 Example 1:
 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.
 Required: Based on the below 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 example

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 7
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
 8
Solution:
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____________________

Account YEAR-TO-DATE
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

 Recurrent Expenditure Report
9

 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.

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 Recurrent Expenditure Report
10

 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.
 The format of the report is indicated below.
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 Recurrent Expenditure Report
11

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 Recurrent Expenditure Report
12

 Example 2: Based on the data given on Example 1, prepare the Recurrent

Expenditure report

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 Capital Expenditure Report
13

 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.

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 Capital Expenditure Report
14

 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 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.

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 Capital Expenditure Report
15

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 Transfer Report
16

 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.

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 Transfer Report
17

 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.
 Part 1
 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.

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 Transfer Report
18

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 Transfer Report
19

 Example 3: Based on the data given in Example 1, you are

required to prepare the Transfer Report Part I.

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 Transfer Report
20

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 Transfer Report
21

 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
 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

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 Transfer Report
22

 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.

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 Transfer Report
23

 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.

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 Transfer Report
24

 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.

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 25

Figure 1.5 (Continued)

4005 4006 4007

Da De Cre Dat De Cre Da De Cre Da De Cred
te bit dit e bit dit te bit dit te bit it

Total
Net
activity
BOM
Balance
EOM
Balance
 Receivables Report
26

 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.

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 Receivables Report
27

 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.

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 Receivables Report
28

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 Receivables Report
29

 Example 4:
 Based on the data provided in Example 1, you are
required to prepare receivable report.

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Solution:
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____________________

Account YEAR-TO-DATE
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

Prepared by Name and Signature

 Payables Report
31

 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.

By: Tahir D. 1/18/2018

 Payables Report
32

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 Payables Report
33
Example 5:
Based on the information given in Example 1, you are required to prepare the Payables report.

Solution:
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 Payables
Code
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
5052 Court deposits
5053 Hospital deposits
5054 Other deposits
5061 Retention on contract
Total (To Trial Balance) 19850

Prepared by Name and Signature

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 Trial Balance
34

 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.

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 Trial Balance
35

 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.

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 Trial Balance
36

 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.

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 Trial Balance
37

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 Trial Balance
38

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Submitting Monthly Reports to the Ministry
of Finance and Economic Development
39

 Monthly reports will be prepared and submitted to

concerned body or Ministry of Finance and
Economic Development within two weeks of the last
day of the month by all Accounting Units.
 All transactions that occur during a month should be
recorded daily on the Transaction Register and into
the appropriate General and Subsidiary Ledgers.
 However, if some transactions for the month are not
entered into the Transaction Register by the end of
the month, they will not be included in the report of
the specified month.

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Submitting Monthly Reports to the Ministry
of Finance and Economic Development
40

 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.

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Submitting Monthly Reports to the Ministry
of Finance and Economic Development
41

 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 MoFED during the third week
of the month.

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Central Accounts Department at Ministry of Finance
and Economic Development will:
42

 Verify the mathematical accuracy of all reports.

 Verify that totals in the revenue/assistance/loan report, recurrent
expenditure report, capital expenditure report, transfer report,
receivables report, and payable report are carried forward to the trial
balance.
 Verify that the EOM Balance in Part 2 of the transfer report is carried
forward to part 1 of the transfer report.
 Reconcile individual transfers recorded on the transfer report with
its records.
 Visit any reporting entity that does not report within three weeks to
identify and assist with monthly reporting.
 Prepare and distribute various reports for FGE.
 Consolidate balances for each account into a FGE Financial
Statement.
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Chapter Five

43

FINANCIAL
STATEMENTS
 Introduction
44
 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
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 Introduction
45

 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.

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 Introduction
46
The FGE accounting system can produce the following set of financial
statements:
A set of federal-level financial statements that includes:
Statement of Financial Position
Statement of Financial Performance
Statement of Changes in Net Assets/Equity
Cash Flow Statement
Accounting Policies and Notes to Financial Statements
Statement of Comparison of Budget and Actual Amounts – Domestic
Revenue
Statement of Comparison of Budget and Actual Amounts – External
Assistance
Statement of Comparison of Budget and Actual Amounts –
Expenditure
Comparison of Original and Adjusted Budget and Actual Amounts
Statement of Expenditure by Functional Classification

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 Introduction
47

 A set of countrywide financial statements that includes:

 Summary Statement of Domestic and External Revenues
 Summary Statement of Expenditure

 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.
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 Introduction
48

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

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 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
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

 50
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

Balance as at 7 July 20X2 0

 51
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

 52
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

 53
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

 GOVERNMENT OF ETHIOPIA
Accounting Policies and Notes to Financial Statements
54

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 55

2 Receivables

Advances
Prepayments
Others ___________ ______

Advances represent amounts due from government entities and staff. Prepayments represent
amounts due from suppliers, contractors and consultants. Others represent amounts due from
peasant associations, cooperatives, individuals, private organizations and others.
 56
GOVERNMENT OF ETHIOPIA
Accounting Policies and Notes to Financial Statements

Notes to Financial Statements

Ethiopian Birr ‘000

3 Payables 20X2 20X1

Accounts Payable
Payables within Government
Direct advances
Treasury bills
Deposits
Retentions ___________ ______
Accounts payables represent grace period payables, sundry creditors, pension contributions
payable, salary payable and other payroll deductions. Payables within government represent
amounts due to government entities and staff. Deposits represent customs, court, hospital bid
bond, VAT and other deposits.
 Tax Revenues
57

 Tax revenues are legally mandated payments to

government.
 Tax revenues represent taxes on income, profits
and capital gains, value added tax and sales
turnover tax on domestically manufactured
goods and services, excise tax and foreign trade
taxes which include excise tax, value added tax,
customs and export duties.
 The breakdown of tax revenues by revenue item
is provided in the statement of comparison of
budget and actual amounts – domestic revenue.
 Non Tax Revenues
58

 Non-tax revenues represent administrative fees

and charges, sales of goods and services and
miscellaneous revenues.
 The breakdown of non tax revenues by revenue
item is provided in the statement of comparison
of budget and actual amounts – domestic
revenue.
 Subsidies
59

 Subsidy revenue represents treasury funds

received by regions from the federal government
to execute their recurrent and capital budgets
and subsidy expense represents treasury funds
transferred by the federal government to regions
to execute their recurrent and capital budgets.
 Municipality Revenues
 Municipality revenue represents different types
of municipal taxes, municipal rents and service
charges and sale of goods and municipal services.
 Other Revenues
60

 Other revenue represents government

investment income including dividend income,
residual surplus and capital charges.
 The breakdown of other revenues by revenue
item is provided in the statement of comparison
of budget and actual amounts – domestic
revenue.
 Personnel Services
61

 Personnel services represent government

pension contributions made to pension funds
and salaries, wages, allowances/benefits paid to
permanent, contracted, externally contracted
and casual staff.
 The breakdown of personnel services by expense
item is provided in the statement of comparison
of budget and actual amounts – expenditure.
 Goods and Services
62

 Goods and services represent expenditure

incurred on goods and supplies, traveling,
maintenance and repairs, training, stocks of
emergency and strategic goods and contracted
services.
 The breakdown of goods and services by expense
item is provided in the statement of comparison
of budget and actual amounts – expenditure.
 Fixed Assets and Construction
63
 Fixed assets and construction represent
expenditure incurred in the acquisition of fixed
assets and the pre-construction and construction
of buildings and infrastructure.
 The breakdown of fixed assets by expense item is
provided in the statement of comparison of
budget and actual amounts – expenditure.
 Other Expenses
64

 Other expenses include contingency and

miscellaneous payments, compensation to
individuals and institutions, government
investments, grants to institutions, and
contributions to international organizations.
 The breakdown of other expenses by expense
item is provided in the statement of comparison
of budget and actual amounts – expenditure.
 External Assistance
65

 External assistance represents the amounts

contributed by donors as grants and are
recognized as revenue on receipt of funds.
 The breakdown of external assistance by donor is
provided in the statement of comparison of
budget and actual amounts – external assistance.
 External Loans
66

 External loans represent amounts received from

external lenders as loans during the fiscal year
and are recognized as revenue on receipt of funds
directly or payments to suppliers on behalf of the
government.
 The breakdown of external loans by lenders is
provided in the statement of comparison of
budget and actual amounts –external loans.
 Capital Revenues
67

 Capital revenue represents proceeds from the

privatization of state owned enterprises, sale of
fixed assets, stocks and intangible assets and
amounts received from non-governmental
sources for capital purposes.
 The breakdown of capital revenues by item of
revenue is provided in the statement of
comparison of budget and actual amounts –
domestic revenue.
 Debt Repayments
68

 Debt repayments to domestic and external

lenders represent the principal amounts repaid
during the year and are recognized as
expenditure.
 The breakdown of debt repayments by internal
and external debt is provided in the statement of
comparison of budget and actual amounts –
expenditure.
Finance Costs

Finance costs represent payments of bank charges and interest on external and domestic debt.
69

Long Term Foreign Loans

20X2 20X1
At the beginning of the year 0 0
Additions 0 0
Amounts written off 0 0
Repayments 0 0
Exchange Differences 0 0
At the end of the year 0 0

The amounts falling due for repayment within the next 12 months amount to Birr …..

Details of the lenders, date of obtaining loan, amount due in foreign currency and the period of
repayment are detailed below:

Name of Lender Date of loan Amount Due Period

 GOVERNMENT OF ETHIOPIA
Accounting Policies and Notes to Financial Statements
70
Notes to Financial Statements

Ethiopian Birr ‘000

Long Term Domestic Loans

20X2 20X1

At the beginning of the year 0 0

Additions 0 0
Repayments 0 0
At the end of the year 0 0

Maturity Analysis
Due within 1 year 0 0
Due within 2 to 5 years 0 0
Due after more than 5 years 0 0

The loans represent long term bonds issued.

Comparison of Budget and Actual Amounts
– Domestic Revenue
71

 The causes for material differences between the

actual amounts and the budget amounts are
detailed below by item of revenue:
 Comparison of Budget and Actual
Amounts – Expenditure
 The causes for material differences between the
actual amounts and the budget amounts are
detailed below by item of expenditure:
 Contingent Liabilities
72

 A list of contingent liabilities, explaining its type,

nature and circumstances should be provided
together with a reliable estimate of the probable
amount.
 Other Notes
 Any other notes and disclosures that MOFED
may decide to include as part of the financial
statements.
 Accounting Policies
73

 The principal accounting policies of the Government,

which are set out below, have been applied
consistently throughout the period.
 BASIS OF ACCOUNTING
 The financial statements have been prepared on the
historical cost basis using a modified cash basis of
accounting that recognizes the following non-cash
transactions:
 Revenue is recognized when:
 Aid in kind is received.
 Payroll is processed (income tax and employee fines)
 Salary advance is made to an employee (interest on salary
advances)
 Withholding tax is deducted from the amount due to a supplier
 Accounting Policies
74

 Expenditure is recognized when:

 Payroll is processed (salary and pension expenses)
 Aid in kind is received
 Goods are received or services are rendered
 At the end of the year, a grace period payable is accounted for.
 Intergovernmental transfers are recognized without actual cash
movement
 Amounts borrowed using treasury bills and direct advances from
the National Bank of Ethiopia are recognized as current liabilities
 REVENUE
 Revenues are recognized on receipt of amounts except as stated
above.
 FINANCE COSTS
 Finance costs are recognized as an expense in the period in which
they are paid.
 Accounting Policies
75

 TRANSLATION OF FOREIGN CURRENCIES

 Transactions denominated in foreign currencies are
translated into Ethiopian Birr at the rates of
exchange ruling at the date of the transaction.
 Cash and bank balances that are denominated in
foreign currencies are translated at the rates of
exchange ruling at the year end and the exchange
gains/loss arising from such translation are
recognized as revenue/expenditure respectively.
 CONSOLIDATION
 The accounts of controlled entities are not
consolidated– for example Ethiopian Airlines and
Ethiopian Telecommunications Corporation.
 Chapter 6

76

FINANCIAL ADMINISTRATION
I N F G E A C C O U N T I NG S Y S T E M
The financial administration in FGE mainly involves
Ministry of Finance and Economic Development
77
(MOFED) and Regional Finance and planning offices
and a Public Body.
Figure 1.2 Shown the structure of financial administration in the budget process.

Figure 1.2: SRTUCTURE OF FINANCIAL ADMINISTRATION IN

THE BUDGET PROCESS

Ministry of Finance and Economic Development

Public Body

Budgetary Institution: Project

ACCOUNTING UNIT
or Sub-Agency
 78

FIGURE 1.1 shows this administrative structure.

FIGURE 3.1 STRUCTURE OF FINANCIAL ADMINISTRATION WITHIN A PUPLIC BODY

Head of Public Body

Head of Administration and Finance

Head of Budget and General Service

Accounts

Budget Section
Accounts Section

The remaining sections in this chapter include an overview of the roles and responsibility of
MoFED and PBs in the FGE accounting system.

Programs
Accountant Cashier
Programs
Planning is conceived in terms of programs and encompasses periods of up to three years. A
 79
 The following are responsibilities of MOFED, Budgetary Institutions,
Accounting unit, Reporting Entity, Cashier and Accountant in the
financial administration in the Budget process and within the Public
Body

 Ministry of Finance and Economic Development (MOFED)

 MOFED administers the financial system for the federal government
and has the highest level of administrative authority. MOFED consists
of a:
 Budget Department that prepares and distributes notification of approved federal
budgets and administers the budget.
 Central Accounts Department that receives monthly repots and compiles financial
statements for the federal government.
 Central Treasury Department that receives and distributes cash from central treasury.
 Credit and Investment Department that manages the federal government's
investments and debt.
 This is not a complete description of MOFED or its departments. This
is description of their roles and responsibilities within the accounting
system.
 80
Budgetary Institution (BI)
 Budgetary Institutions are defined as those
institutions that are fully or partially financed by
Government.
 The budget process assumes the appropriation of
budgets. The appropriated budget is the budget
approved by the Council of people's
Representatives (CPR).
 The appropriated budget is broken down by:
 Recurrent and capital expenditure for the federal
government, and
 Subsidy for each regional government
 81
 Accounting Unit
 For cash management, another entity is created: the Bank Account (BA).
 The BA is not coded in the chart of accounts and does not receive a budget.
However, it is important for cash Management and control.
 The FGE accounting system includes the BA in the accounting system.
 A PB may administer many BIs and many BAs, or a PB may have only one BI and
one BA. Each BA:
 Is managed by an accountant.

 May:

 Have its own cashier,

 Share a cashier with other BAs, or
 Have no cashier associated with it (like foreign currency bank accounts)
 Handles cash flows:

 For one or more than one BI, and

 From one source of financing (domestic, assistance or loan).
 For more than one type of budget (capital/recurrent).
 82
 An accounting unit is the unit that initially captures
and records transactions into the accounting system.
 If a BA handles cash for only one BI(BI/BA), the
accounting unit:
 Processes transactions for the BI/BA,
 Maintains registers for the BI/BA,
 Maintains a general ledger for the BI/BA.
 Maintains subsidiary ledgers for:
Asset accounts.
Liability accounts.
Letters of credit.
 Prepares a monthly report for the BI/BA.
 83
 Reporting Entity
 A reporting entity is the entity that sends monthly reports
to MOFED.
 Although the accounting unit prepares monthly reports,
every accounting unit may not send monthly reports
directly to MOFED.
 Each of the following may apply to a reporting entity:
 A reporting entity may be an accounting unit, and an
accounting unit may consist of only one BI. Therefore, a single
BI may be a reporting entity.
 A reporting entity may be a PB that receives the monthly
reports from several accounting units.
 Whoever sends the reports to MOFED is the reporting
entity. Therefore, the reporting entity is not, necessarily,
an accounting unit.
 84
 Cashier and Accountant
 In the FGE accounting system of cash control, the
cashier's function and the accountant's function are
distinct.
 Cash consists of currency and checks.
 The cashier's function is to maintain and control cash in
the safe.
 The accountant's function is to maintain and control cash
at the bank.
 Only the cashier can receive currency and checks and
make disbursements in currency.
 Daily, the cashier should count cash on hand and
reconcile ending cash on hand to the cash book.
 The cash in safe is controlled by an imprest system.
 85
 Public Bodies with Branch Bank Accounts
 Some PB s establishes operations or branches in more than one
location, and opens a bank account at each branch.
 These branch bank accounts do not receive or send transfers
directly to MOFED.
 The public Body uses Branch bank accounts for operations within
the Public Body. They are blocked at the end of the year.
 Some public Bodies maintain other types of bank accounts for
special purposes, such as deposits. These are not blocked at the
end of the year and are not considered branch bank accounts.
 Depending on the capacity of the PB, accounting for the branch
bank account can be handled in one of the two ways:
 If there is sufficient capacity, each branch bank account can
be treated as an accounting unit.
 If there is no sufficient capacity, each branch bank account
can be treated as a safe.
 86
 Branch Bank Account treated as
Accounting Unit
 If the branch bank account is treated as an
accounting unit:
 A general ledger is established for the branch bank
account
 Cash movements between the main bank account of
the PB and the branch bank account are recorded as
transfers,
 Subsidiary ledgers are established for each BI
receiving funds from the branch bank account, and
 A monthly report is prepared and sent to the
accounting unit of the PB's main bank account
 87

 Branch Bank Account treated as a Safe

 If the branch bank account is treated as a safe:
 A cash book is maintained for the branch bank account,
and
 Receipt and payment vouchers are given to the main bank
account's accounting unit.
 The accounting unit of the PB's main bank account
does the following:
 Cash movements between the main bank account of the
PB and the branch bank account are recorded as
advances, and
 Receipt and payment vouchers received from the branch
bank account are recorded in general and subsidiary
ledgers.
Thank You
88