Manual 3 - Federal Accounting System Chapter 10. Transactions

Manual 3 - Federal Accounting System
Chapter 10. Transactions

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CHAPTER 10: TRANSACTIONS
The purpose of this chapter is to demonstrate how to make entries using the FGE chart of
accounts as debits and credits into the Transaction Register.
1. Cash movements from/to:

 MOFED to Public Bodies – Zero Balance Bank Accounts
 MOFED to Public Bodies – Non Zero Balance Bank Accounts
 Public Bodies to MOFED
 Public Bodies to Region Sector Bureaus
 Bank Accounts within a Public Body – Same Source of Finance
 Bank Accounts within a Public Body – Different Source of Finance
 Bank Accounts within a Public Body – Transfer to Branch
 Inter Bank Transfers
 Bank to Safe
 Safe to Bank
 Cash Imprest Payments
 Check Deposits to Bank
 Revolving fund – Staff Loans
2. Non-Cash Transfers
3. Revenue/Assistance/Loan
 Domestic Revenue
 Direct Deposits of Revenue into MOFED Bank Account
 Community Development Contribution in Cash
 Community Development Contribution in Kind
 Aid in Kind
 Aid in Cash
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4. Operating Expenditure:
 Subsidies to Regions
 Payments to Transfer Recipients by MOFED
 Cash Payments by Public Body to Region as part of Specific Purpose Grant
 Operational Expense without withholding of tax
 Operational Expense requiring withholding of tax
 Payments by MOFED on behalf of Public Bodies
 Letters of Credit
 Construction Projects
5. Salary
 Salary Expenditure
 Withdrawal of Cash from Bank to pay Salary
 Settlement of Salary
 Unpaid Salary
 Payment of Pension
 Salary Adjustment - Unearned Salary
 Staff Loans
 Employees transferred with Staff Loans
 Cost Sharing
6. Suspense Payments
7. Receivables and Payables

 With MOFED
 With Employees
 Reimbursed payments
 Funds held on employee's behalf
 To/from Suppliers
 Receivables from suppliers
 Payables to suppliers – During the Fiscal Year
 Grace period payables – At the end of the Fiscal Year
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 To/from Regions
 To/from Public Bodies
 Deposits
 Receipt and return of deposit
 Deposit kept in separate bank account
 VAT deposit
 Value Added Tax
8. Specific Purpose Grants
9. Closing Entry
10. Beginning of Year Procedures
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1. CASH TRANSFERS
Cash transfers are cash movements within government institutions or between bank
accounts that do not create obligations to provide further documentation or repayment.
MOFED to Public Bodies – Zero Balance Accounts

For public bodies located in Addis Ababa, MOFED authorizes funds by setting drawing
limits at the National Bank of Ethiopia against which the public bodies draws funds up to
the maximum of the specified drawing limit. The drawing limits so established determine
the amount of cash that can be utilized by a public body. The Public Body issues checks to
effect payments for good and services and the checks issued determine the balance of
unutilized drawing limits. The NBE issues advices daily for all checks presented for
encashment. The bank advice is the supporting document for the Public Body to record
transfers from MOFED. Any unutilized drawing limit by a Public Body is carried forward to
the next period.
Example: The Ministry of Health issues a check for Birr 150,000 for purchase of fuel, 10,000
for stationery, 5,000 for tiers and 120,000 for medical supplies. It records each check as
expenditure when issuing the check. A Drawing Limits Register as described in Chapter 5 is
also maintained by the PB to identify the balance of the drawing limits.
Transaction Register of PB
Account Cash at Bank
Ref Description TB Number Others 4103
Dr Cr Dr Cr
BPV Fuel - 6217 150,000 150,000
BPV Stationery 6212 10,000 10,000
BPV Tyres 6241 5,000 5,000
BPV Medical Supplies 6214 120,000 120,000
The Ministry of Health receives one bank advice at the end of each day from the Bank for the
all checks issued during that particular day. It uses the bank advice to record the transfer.
Dr Cr Dr Cr
RV Cash transfer from MOFED - 4017 285,000 285,000
MOFED also receives a copy of the single bank advice of Birr 285,000 from the Bank relating
to the checks issued by the Ministry of Health. It uses the bank advice to record the transfer
of the cash utilization by the PB from the Zero Balance Bank Account.
Transaction Register of MOFED
Dr Cr Dr Cr
BA Cash transfer to Public Body - 4017 285,000 285,000
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MOFED to Public Bodies - Non Zero Balance Accounts
For public bodies located outside Addis Ababa, MOFED disburses funds by transfer of
funds to the Public Bodies bank account. At MOFED, although a transfer authorization to
one bank account may include funds for more then one BI, the entire transfer is one.
Therefore, in the Transaction Register maintained at MOFED, only one entry is made for the
total transfer. The BI code for the entry is the BI code of the Reporting Entity.
Example: Hawassa University receives from MOFED a transfer of Birr 150,000 for capital
expenditure.
Transaction Register of MOFED:
Dr Cr Dr Cr
BA Cash transfer to PB - 4004 150,000 150,000
Transaction Register of Public Body:
Dr Cr Dr Cr
RV Cash transfer from MOFED - 4004 150,000 150,000
If the bank charges a service charge for the transfer:

 The service charge should be recorded as a debit to account code 6256.
 Cash at bank 4103 should be debited for the amount of cash actually received.
 The appropriate transfer account code should be credited for the gross amount
Example: MOFED transfers of Birr 150,000 to a Public Body for capital expenditure. The
bank deducts 20 birr as a service charge; the Public Body receives Birr 149,980.
Dr Cr Dr Cr
Dr Cr Dr Cr
RV Bank Service Charge 02 6256 20
Cash transfer from MOFED - 4004 150,000 149,980
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Public Bodies to MOFED
Cash transfers from bank accounts of Public Bodies to MOFED bank accounts are recorded:
 By MOFED, as a debit to Cash at Bank 4105 and a credit to 4009 transfer code, and
 By the Public Body, as a debit to 4009 and a credit to Cash at Bank 4103.
Example: A Public Body collected revenue of Birr 15,000 that is transferred to MOFED.
Dr Cr Dr Cr
RV Cash transfer from PB - 4009 15,000 15,000
Dr Cr Dr Cr
BPV Cash transfer to MOFED - 4009 15,000 15,000
At the end of the year balances in blocked bank accounts at Public Bodies are transferred to
MOFED based on standing instructions. The bank transfers the balance from the account at
the PB immediately to MOFED, but the balance is not credited to MOFED’s bank account for
weeks. The transaction should be recorded as follows:
 By the Public Body on the last day of the year, as a debit to transfer code 4009 and a
credit to Cash at Bank 4103, and
 By MOFED on the last day of the year, as a debit to Deposit in Transit 4114 and a
credit to transfer code 4009, and, when the cash is received in the bank account, as a
debit to Cash in Bank 4105 and a credit to Deposit in Transit 4114.
Example: A Public Body transferred Birr 10,000 is transferred but not credited to MOFED.
Dr Cr Dr Cr
BPV Cash transfer to MOFED - 4009 10,000 10,000

Ref Account Cash at Bank
Description TB Number Others 4105
Dr Cr Dr Cr
JV Cash transfer from PB - 4009 10,000
4114 10,000
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Public Bodies to Region Sector Bureaus
Federal Ministries may transfer donor funds directly to RSB and such payments to a region
from the federal level budgeted as part of the federal budget. The responsibility for the
budgeted expenditure remains with the Federal Ministry, although the expenditure is
executed by the RSB. Since a settling of the funds is expected, the receipt of funds is
recorded as a payable by the RSB, and the return of invoices and/or cash is recorded as an
elimination of the payable.
Example: The Ministry of Education sends Birr 50,000 to the Regional Education Bureau for
training.
Transaction #1: Cash is received from the Ministry of Education to deliver training
Dr Cr Dr Cr
BPV Due from RSB 4210 50,000 50,000
Transaction #2: The Regional Education Bureau delivers raining at a cost of Birr 47,000 and
sends the cost documents to the PB and refunds the balance of Birr 3,000..
Dr Cr Dr Cr
JV Settlement of dues 6271 47,000
4210 47,000
RV Refund of balance due 3,000
4210 3,000
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Bank Accounts within a Public Body – Same Source of Finance
Example: Bank Account #1 transfers Birr 150,000 to Bank Account #2 using the same SOF.
Transaction Register Public Body
Dr Cr Dr Cr
BPV Cash transfer to BA #2 - 4103-1 150,000
4103-2 150,000
Bank Accounts within a Public Body – Different Sources of Finance
Example: Bank Account #1 transfers Birr 150,000 to Bank Account #2 using a different SOF.
Transaction Register Public Body – Bank Account # 1
Dr Cr Dr Cr
BPV Cash transfer to BA #2 - 4010 150,000 150,000
Transaction Register of Public Body - Bank Account #2:
Dr Cr Dr Cr
RV Cash transfer from BA #1 - 4010 150,000 150,000
Bank Accounts within a Public Body – Transfer to Branch
Example: Bank Account #1 transfers Birr 150,000 to Bank Account #2 to a branch office.
Transaction Register Public Body – Bank Account # 1
Dr Cr Dr Cr
BPV Cash transfer to BA #2 - 4008 150,000 150,000
Transaction Register of Public Body - Bank Account #2:
Dr Cr Dr Cr
RV Cash transfer from BA #1 - 4008 150,000 150,000
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Inter Bank Transfers
Cash may be transferred between bank accounts of MOFED
Example: MOFED transfers Birr 150,000 from Bank Account # 1 to Bank Account # 2.
Transaction Register of Bank Account #1
Dr Cr Dr Cr
BA Cash transfer - 4008 150,000 150,000
Transaction Register of Bank Account #2
Dr Cr Dr Cr
RV Cash transfer - 4008 150,000 150,000
Bank to Safe
The Accountant writes a check to the cashier to put cash into the safe for petty cash. The
source document is a Bank Payment Voucher for the Transaction Register.
Example: A check for Birr 5,000 is written to the cashier for petty cash.
Account Cash at Bank Cash in Safe
Ref Description TB Number 4103 4101
Dr Cr Dr Cr
BPV Cash withdrawn for safe - - 5,000 5,000
Safe to Bank
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 Cash Book.
Example: The Cashier deposits Birr 15,000 into the depositary bank.
Dr Cr Dr Cr
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RV Cash deposited into bank - - 15,000 15,000
Cash Imprest Payments
Each Public Body should establish the amount of cash to hold in petty cash. The Cashier
makes cash payment from the imprest fund using Cash Payment Vouchers. When the petty
cash balance is low, the Cashier submits the Cash Payment Vouchers to the Accountant
together with the Petty Cash Summary Sheet as described in Chapter 9. The Accountant
writes a check to the Cashier for the total amount of the Cash Payment Vouchers in the Petty
cash Summary Sheet to reimburse the imprest fund.
Example: The Accountant pays the Cashier Birr 2,000 by check to replenish the petty cash for
cash paid to an employee for per diem of Birr 2,000. The Cashier records the receipt in the
Petty Cash Book. The Accountant records the Cash and Bank Payment Vouchers in the
Transaction Register as follows:
Ref Description TB Number Others 4103 4101
Dr Cr Dr Cr Dr Cr
CPV Per Diem 01 6231 2,000 2,000
BPV Cash to Cashier 2,000 2,000
Check Deposits into Bank
Example: Assume that a check of Birr 500 received as court deposit is deposited in the
depositary bank by the Cashier. The accountant will first issue a receipt voucher to the
Cashier for the court deposit.
Ref Description TB Number Others 4103 4101
Dr Cr Dr Cr Dr Cr
RV Deposit 5052 500 500
The Cashier will record the receipt of the check in the cash book as a receipt and on deposit
of the check in the bank will record it as a payment in the cash book.
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Transfers to Revolving fund – Staff Loans
An employee can receive a staff loan under appropriate conditions. A request is made by
the Public Body for approval to MOFED and setting of drawing limits to include the staff
loan. The Public Body issues a check to withdraw cash from the zero balance bank account
and pays the staff loan to the employee. When a long-term salary advance is processed,
interest is charged and withheld from the advance.
Refund of the staff loans by deductions from the employee’s salary is transferred to a
revolving fund that is intended to fund future staff loans.
Transaction 1: MOFED approves Birr 2,000 as staff loans to a Public Body from the zero
balance bank account based on the approved list of employees eligible for staff loan.
Transaction Register of Public Body on withdrawal of cash:
Dr Cr Dr Cr
BPV Cash withdrawal 1,900 1,900
Transaction Register of Public Body on payment of staff loan:
Account Cash in Safe
Dr Cr Dr Cr
BPV Staff loan 4203 2,000
Interest 1465 100 1,900
Transaction Register of Public Body on receipt of bank advice:
Dr Cr Dr Cr
RV Revolving fund transfer - 5035 1,900 1,900
Transaction Register of MOFED on receipt of bank advice:
Dr Cr Dr Cr
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2. NON-CASH TRANSFERS
Non-cash transfers are used to record a transfer when cash does not actually move. Non
cash transfers include payments made by MOFED on account of Public Bodies, adjustments
for opening stock of supplies, opening cash in safe and opening balance of receivables.
The example below details customs payments made by MOFED on behalf of a Public Body
when the source of finance is not domestic. For domestic source of finance, Public Bodies
will pay the customs duty directly to the Customs Authority.
Example: The Ministry of Health (MOH) requests MOFED to pay customs duty amounting to
Birr 150,000 on its behalf to the Customs Authority (CA) for motor vehicles from its capital
expenditure budget.

Dr Cr Dr Cr
JV Customs duty - MOH - 4054 150,000
Customs duty - CA - 4055 150,000
Transaction Register of Ministry of Health:

Dr Cr Dr Cr
JV Purchase of motor vehicles 02 6311 150,000
Customs duty - MOFED– - 4054 150,000
Transaction Register of Customs Authority:

Dr Cr Dr Cr
JV Transfer to MOFED - 4055 150,000
Duty on Motor Vehicles - 1301 150,000
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3. 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. Account
codes for Domestic Revenue are 1000-1999, External Assistance are 2000-2999 and for
External Loan 3000-3999.
Domestic Revenue
The source document for collection of revenue is a Receipt Voucher.

Revenue/Assistance/Loan receipts are reported monthly on Me/He 21.
Example: The Ministry of Foreign Affairs collects Birr 50,000 in fees for visas.
Transaction Register of Ministry of Foreign Affairs:
Dr Cr Dr Cr
RV Revenue - 1411 50,000 50,000
Direct Deposit of Revenue into MOFED Bank Account
Some Public Bodies deposit revenues directly into a MOFED bank account. In such cases
the Public Body records a debit to transfer code 4009 and a credit to the revenue code.
Example: Inland Revenue deposits Birr 100,000 from the collection of agricultural income tax
directly into a MOFED bank account.
Account Cash at
Ref Description TB Number Others Bank
4103
Dr Cr Dr Cr
RV Agricultural Revenue 1107 10,000
Transfer 4009 10,000
When MOFED receives the bank advice, MOFED records a debit to Cash in Bank 4105 and a
credit to transfer account code 4009.
Dr Cr Dr Cr
RV Transfer from Inland Rev - 4009 100,000 100,000
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Community Development Contribution in Cash
In Addis Ababa, the Community Development Committee collects cash from residences to
construct schools and health posts. The committee deposits such cash collections to the
community development bank or to the cashier.
Example: Birr 15,000 is collected by the Community Development Committee in Addis

Ababa from residences as contribution for construction of secondary schools.
Dr Cr Dr Cr
SRV Public contribution - 1792 15,000 15,000
Community Development Contribution in Kind
In Addis Ababa contribution in kind represents contribution of goods or services or

materials by the community that are used in the construction of schools, health posts and
conference halls. These contributions should be accounted to accumulate the project costs.
Scenario 1 Material Contribution

Residences contribute sand stone and cement estimated Br. 7,500 for a school project. A
Model 19 is prepared.
Dr Cr Dr Cr
JV Material contribution 2 6323 7,500
1792 7,500
Scenario 2 Labor Contribution
Residence contributes Br. 2,500 in the form of labor for the school project. Time sheets are
approved.
Dr Cr Dr Cr
JV Lab our contribution 2 6323 2,500
1792 2,500
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Aid in Kind
Aid in kind is goods or services (such as technical assistance) provided to a Public Body by
donors. Aid in kind is received when goods are received or services are rendered, and no
payment is expected. Aid in kind represents two transactions simultaneously: the receipt of
assistance and the expenditure of assistance. Aid in kind should be budgeted and recorded
as both revenue and expenditure. The expenditure should be recorded in the subsidiary
ledger for the budgeted project, using the 4-digit Source of Funding code assigned to the
project.
Example: Aid in kind is received by a Public Body in the form of a motor vehicle with a cost
of Birr 150,000 from USAID under the capital expenditure budget.
Transaction Register of the Public Body:

Dr Cr Dr Cr
JV Motor vehicles 02 6311 150,000
Assistance 2284 150,000
Aid in Cash
Aid in cash can be made by donors. Aid in cash is recognized if a cash or check deposited or
transfer made by the donors. If aid in cash was not budgeted, a budget supplement should
be requested and approved.
Accountants should receive a copy of deposit slip or credit advice or receipt voucher. Aid in
cash represents two transactions simultaneously: the receipt of assistance and cash.
Example: Cash in kind is received from Japan Government of Birr 150,000 by check for
school construction under the capital expenditure budget.
Transaction Register of Public Body

Dr Cr Dr Cr
BPV Assistance 2 2287 150,000 150,000
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4. Operating Expenditures
Public Bodies are authorized to make cash expenditures from funds budgeted for that
purpose. Expenditures from the recurrent budget and capital budget are reported monthly
on separate monthly reports. The Public Body should maintain a subsidiary ledger for each
expenditure account code if the Public Body handles more than Budgetary Institution. Each
Budgetary Institution should be an account in the subsidiary ledger.
Subsidies to Regions by MOFED
Payments by MOFED to Regions are budgeted expenditures of the federal government.

Example: A subsidy payment of Birr 32,400,000 is made to a region.
Dr Cr Dr Cr
BA Region subsidy 6411 32,400,000 32,400,000
Payments to Transfer Recipients by MOFED
Payments by MOFED to Transfer Recipients (Functional classification 400-499) are budgeted

expenditures of the federal government.
Example: A payment of Birr 32,000 is made to the Red Cross.
Dr Cr Dr Cr
BA Region subsidy 6412 32,000 32,000
Cash Payment by Public Body to Region as part of Specific Purpose Grant
Occasionally, Public Bodies make cash payments to regions. Usually a sector line ministry
receives funds from a donor through Channel 2. Some of the funds are intended for sector
bureaus in the regions. When a Public Body pays cash to regions, the payment is part of the
region’s subsidy. The Public Body should record the payment as a subsidy payment.
Example: The Ministry of Health sends Birr 50,000 to a region as part of HSDP.
Transaction Register –Ministry of Health:
Dr Cr Dr Cr
BPV Region Subsidy - 6411 50,000 50,000
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Operational Expense without Withholding Tax
Example: An accountant pays by check an amount of Birr 1,500 for office supplies.

Dr Cr Dr Cr
BPV Office supplies paid in cash 6212 1,500 1,500
Operational Expense 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 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 is 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 appropriate government instead. When a purchase is made that requires the
withholding of tax, a Bank Payment Voucher is prepared that indicates:
 The expenditure account code with a debit for the full purchase price.
 The tax deducted is payable account code 5006 to federal or region tax authority for
the amount of the tax. The region or federal tax authority will record the withholding
tax as revenue code 1103 or 1104 (depending of whether the supplier is an individual
or a corporation) when they receive the cash from the public body.
 Cash at Bank 4103 with a credit for the actual amount paid to the supplier.
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Operational Expense Requiring Withholding of Tax
Example: A Public Body buys office supplies from a corporation for Birr 100,000 from its
recurrent expenditure budget – Birr 98,000 relates to the cost of the office supplies and Birr
2,000 is the withholding tax. The supplier is federal tax payer.
Transaction #1: Payment effected to supplier

Dr Cr Dr Cr
BPV Office Supplies 01 6212 100,000
Withholding tax payable 5006 2,000 98,000
Transaction # 2: Transfer of Withholding Tax to Federal Inland Revenue Authority

Dr Cr Dr Cr
BPV Transfer to IRA 5006 2,000 2,000
Transaction Register of Inland Revenue Authority:
Dr Cr Dr Cr
RV W. tax revenue 1103 2,000 2,000
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Letters 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 bank account dedicated to
payment of the purchase price when appropriate conditions are met. When a Public Body
opens a Letter of Credit, cash is paid from the Zero bank account of the Public Body to a
bank account at the CBE. The amount of the letter of credit represents a receivable –
advance from the supplier.
Example: The Ministry of Health (MOH) opens a letter of credit for the purchase of medical
supplies valued at birr 45,000.
Transaction Register of Ministry of Health: On opening letter of credit

Dr Cr Dr Cr
BPV Letter of Credit 4251 45,000 45,000
Transaction Register of Ministry of Health: On receipt of bank advice from NBE
Dr Cr Dr Cr
BPV Transfer from MOFED 4017 45,000 45,000
Transaction Register of MOFED: On receipt of bank advice from NBE
Dr Cr Dr Cr
Transaction Register of Ministry of Health: On receipt of medical supplies
Dr Cr Dr Cr
JV Purchase of medical supplies 2 6311 45,000
4251 45,000
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Construction Projects
Long-term construction projects involve complicated financial arrangements. Several

accounting entries are necessary over the life of the project. In general, when a construction
contract is signed, there are several steps in the payment process. At each step, an
accounting entry is required. The general steps are:
 Payment of an advance. Usually the contract calls for an advance payment to the
contractor that 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.
 Deduction of withholding tax on the works completed
Example: Assume the following:

 A contract is signed to construct a building for 1,000,000 birr.
 Terms of contract are:
o Initial advance of 20% = 200,000 birr.
o Advance adjusted proportionately with each payment certificate approval.
o 2% withholding tax on work certified as completed
o Retention of 10% withheld from each payment certificate & paid after final approval.
 Steps in payment are:
1. Payment of 20% advance.
2. Payment certificate when 40% complete.
5. Payment of retention with final approval.
Transaction #1: Payment of 20% advance:

Accountant prepares a check for 200,000 birr.
Dr Cr Dr Cr
BPV Advance to contractor 4251 200,000 200,000
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Transaction # 2: Payment certificate when 40% complete.
Accountant prepares a check for 272,000 birr as follows:
o 400,000 payment certificate request
o 80,000 adjustment to advance
o 40,000 retention
o 8,000 withholding tax
Dr Cr Dr Cr
BPV Construction - Building 02 6323 400,000
Advance to contractor 4251 80,000
Retention on contract 5061 40,000
W/holding tax payable 5006 8,000 272,000

o 40,000 retention
Dr Cr Dr Cr
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o 20,000 retention
Dr Cr Dr Cr
Transaction #5: Payment of retention after final approval of project:

Dr Cr Dr Cr
BPV Retention on contract 5061 100,000 100,000
Transaction #6: Payment of withholding tax to Inland Revenue Authority.

Dr Cr Dr Cr
BPV Settlement of W/H tax 5006 20,000 20,000
Note:
The retention withheld from the contractor is paid at the end of the project life – usually
after a few years. The cash withheld on account of retention is transferred to MOFED and is
not kept with the Public Body. Prior to repayment of the retention the amount of retention
should be proclaimed in the budget to allow MOFED to approve transfer of the retention
amount to the Public Body. The Budget Department at MOFED should review the process
of how such amounts should be budgeted and proclaimed to allow for disbursement to the
Public Body.
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5. SALARY
Salary Expenditure
The Public Body must record the gross salary amount and government’s portion of pension
as expenditure to maintain budget control. The Public Body is paid the total amount
including the pension contributions - employee and government but excluding the amount
deducted for income tax.
MOFED will record in its Transaction Register a debit to transfer code 4017 and a credit to
Cash at Bank 4105 on receipt of debit advice. The Public Body will prepare a Receipt
Voucher for the total amount of cash utilized upon the receipt of credit advice. The entry is
a debit to Cash at Bank 4103, and a credit to transfer code 4017.
Example: A BI requests salary with the following details:

Gross salary 20,000 Deduction: salary advance 600
Pension expense – 6% 1,200 Fine 250
Employee pension - 4% 800 Net Salary Payable 16,350
Income tax 2,000
Dr Cr Dr Cr
JV Salary Expense 1 6111 20,000
Pension Expense 1 6131 1,200
Salary Payable 5004 16,350
Income Tax 1101 2,000
Staff Advance 4203/XX 600
Fine 1489 250
Pension Payable 5003 2,000
Withdrawal of Cash from Bank to Pay Salary
Account Cash in Safe Cash at Bank
Dr Cr Dr Cr
BPV Cash transfer for salary 16,350 16,350
The Cashier records Birr 16,350 as a receipt in the cashbook
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Payment of Pension by PB
Dr Cr Dr Cr
BPV Pension Authority 5003 2,000 2,000
Record Debit Advice for Transfer at MOFED

Dr Cr Dr Cr
BPV Transfer to PB 4017 18,350 18,350
Record Credit Advice for Transfer at PB
Dr Cr Dr Cr
Settlement of Salary
Employees sign Model 33 to evidence receipt of salary from the Cashier. After salary period
is over, the Model 33 is used to prepare one CPV for the total salary paid.
Dr Cr Dr Cr
CPV Salary Payable 5004 15,350 15,350
The Cashier records the CPV for Birr 15,350 in the Cashbook. Birr 1,000 remains unpaid.
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Deposit of Staff Loan Recovered into Depositary Bank Account
Employees sign Model 33 to evidence receipt of salary from the Cashier. After salary period
is over, the Model 33 is used to prepare one CPV for the total salary paid.
Account Cash in Bank Cash in Bank
Ref Description TB Number 4103/1 4103/2
Dr Cr Dr Cr
CPV Salary Payable 5004 600 600
The Cashier records the CPV for Birr 15,350 in the Cashbook. Birr 1,000 remains unpaid.
Deposit of Unpaid Salary into Depositary Bank Account
Dr Cr Dr Cr
CPV Deposit - Unpaid salary 1,000 1,000
Record Debit Advice for Transfer at MOFED

Dr Cr Dr Cr
BPV Transfer to PB 4017 600 600
Record Credit Advice for Transfer at PB
Dr Cr Dr Cr
BPV Transfer from BOFED 4017 600 600
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Payment of Unpaid Salary
Cash is first withdrawn from the depositary bank account to pay unpaid salary.
Dr Cr Dr Cr
CPV Deposit - Unpaid salary 1,000 1,000
Payment of unpaid salary

Dr Cr Dr Cr
CPV Salary Payable 5004 1,000 1,000
Salary adjustment - 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 must be reversed for that employee,
and the pension transfer must be corrected. In addition, the pension payment for the next
month’ salary should 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 500 Income tax 35
Pension expense – 6% 30 Salary Payable 445
Employee pension - 4% 20
Transaction Register of MoA:
Dr Cr Dr Cr
JV Salary Expense 01 6111 500
Pension Expense 01 6131 30
Salary Payable 5004 445
Income Tax 1101 35
Pension Payable 5003 50
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Staff Loans
A staff loan of Birr 2,000 is approved for payment to an employee. Interest is charged and
withheld from the advance. The CPV is prepared for the net amount
Transaction Register of MOA
Dr Cr Dr Cr
CPV Staff Loan 4203/XX 2,000
Interest 1465 200 1,800
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Employee transferred with Staff Loan
Employees may be transferred from one Public Body to another. The transferred employee
may have a staff loan with an outstanding balance. The balance for the employee in the loan
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.
Example: An employee is transferred from Public Body #1 to Public Body #2. The employee
has a staff loan with an outstanding balance of Birr 4,100.
Transaction Register of Public Body #1:
Dr Cr Dr Cr
JV Receivables 5035 4,100
Advance to Staff 4203 4,100
Transaction Register of Public Body #2:
Dr Cr Dr Cr
JV Advance to Staff 4203 4,100
Payables 5035 4,100
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Cost Sharing
In some cases employees are provided university or other education - the costs of which are
partly financed by government. These costs are subsequently recovered from the
employees’ salary on a monthly basis based on the agreement with the government. The
scheme is referred to as cost sharing as costs are shared by the employee and government.
In the example below it is assumed that Birr 250 is recovered on a monthly basis from the
employees’ salary on the cost sharing basis.
Example: A employee has salary information on Model 33 with the following details:
Gross salary 20,000 Deduction: Staff Loan 600
Pension expense – 6% 1,200 Cost Sharing 250
Employee pension - 4% 800 Net Salary Payable 16,350
Income tax 2,000
Salary Expense
Dr Cr Dr Cr
JV Salary Expense 1 6111 20,000
Pension Expense 1 6131 1,200
Income tax 1101 2,000
Staff Loan 4203 600
Cost sharing 5007 250
Pension Payable 5003 2,000
Salary Payable 5004 16,350
When the cost sharing amount of Birr 250 is paid to government, the payable account 5007 is
debited and the bank account credited.
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6 SUSPENSE PAYMENTS
Suspense Payment Vouchers (SPV) is treated as cash in safe. However, where the SPV
remains unsettled beyond the prescribed period it is treated as receivables. In such cases, the
Cashier passes the SPV to the Accountant who prepares a CPV to debit receivables and
credit cash in safe. The Accountant attaches the SPV to the CPV as supporting document to
evidence that the employee received the cash.
Transaction 1: A SPV for Birr 500 for per diem is outstanding beyond the prescribed
period.
Dr Cr Dr Cr
CPV Staff Receivable 4211 500 500
The Cashier records the CPV in the cashbook as a payment.
The employee may later settle the outstanding amount on per diem as follows:
Alternative 1: Settled for Birr 500.

Dr Cr Dr Cr
JV Per Diem 1 6231 500
Staff Receivable 4211 500
Alternative 2: Settled for Birr 400 and Birr 100 is returned in cash to safe.
Dr Cr Dr Cr
JV Per Diem 1 6231 400
RV Cash refund 100
Alternative 3: Settled for Birr 600 and Birr 100 is paid in cash to the employee
Dr Cr Dr Cr
CPV Per Diem 1 6231 600
Staff Receivable 4211 500 100
Note: The amount written on the top half of the Cash Payment Voucher in “words”
and “figures” as cash paid out will be only Birr 100
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7. RECEIVABLES AND PAYABLES
A receivable is an amount owed to a Public Body that fall due within one year. A payable is
amount owed by a Public Body that is due within one year.
With MOFED
In very rare situations, MOFED advances cash to Public Bodies. These advances are not
budgeted and are deducted from the budget of the Public Body in the next fiscal year.
Example: Prior to receipt of its budget notification, a Public Body requests funds in June to
pay recurrent expenditures. MOFED sends Birr 5,000.
Dr Cr Dr Cr
BPV Advance for Recurrent 4206 5,000 5,000
Dr Cr Dr Cr
RV Due to MOFED 5024 5,000 5,000
Next Fiscal Year
When the Public Body receives its budget notification, a Ge/Be/We 11/2 is sent to MOFED for
Birr 12,000. This request includes the 5,000 birr received as an advance. MOFED approves
the request, reduces the cash transfer by 5,000 birr, and transfers Birr 7,000 in cash.
Dr Cr Dr Cr
BA Advance for Recurrent 4206 5,000
Transfer – Recurrent 4055 5,000
JV Transfer 4017 7,000 7,000
Dr Cr Dr Cr
RV Due to MOFED 5024 5,000
Transfer – Recurrent 4055 5,000
JV Transfer 4017 7,000 7,000
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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. In most cases these
amounts are recovered from employees by way of payroll deductions. However, alternate
forms of treatment are shown below.
Example: A Public Body receives a telephone bill for Birr 200. 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 50.
Transaction Register of Public Body: When the telephone bill is paid:
Dr Cr Dr Cr
BPV Telephone Expense 01 6258 150
Staff Advance 4203 50 200
Transaction Register of Public Body: When the employee reimburses:
RV Staff Advance 4203 50 50
Treatment #2: The Public Body does not know, at the time the telephone bill is paid, the
amount of the personal telephone calls.
Dr Cr Dr Cr
When the telephone bill is paid:
BPV Telephone Expense 01 6258 200 200
When employee pays:
RV Telephone Expense 01 6258 50 50
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Funds held on employee's behalf
In certain circumstances in Universities, 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 passing 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 2,000 in the bank account of Addis Ababa University to
support the research of an employee.
Transaction #1: Funds are deposited.
Dr Cr Dr Cr
RV Due to Staff 5021 2,000 2,000
Transaction #2: The employee receives 500 birr from the fund.
Dr Cr Dr Cr
BPV Due to Staff 5021 500 500
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To/From 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 1,000 to a supplier for procurement of office
supplies. The supplier delivers the office supplies after 30 days and the actual invoice
amounts to Birr 2,000.
Transaction Register of Public Body: Payment of advance.
Dr Cr Dr Cr
BPV Advance to Supplier - 4253 1,000 1,000
Transaction Register of Public Body: Delivery of supplies.
Dr Cr Dr Cr
BPV Office Supplies 01 6212 2,000
Advance to Supplier - 4253 1,000 1,000
Payables to Suppliers – During the Fiscal Year
Payables are created when a supplier delivers goods or services prior to receiving payment
during the fiscal year (July to June). 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 2,000 on credit from a
supplier. Payment is made after 30 days.
Transaction Register of Public Body: Receipt of office supplies.
Dr Cr Dr Cr
JV Office Supplies 01 6212 2,000
Sundry creditors 5002 2,000
Transaction Register of Public Body: Payment is made.
Dr Cr Dr Cr
BPV Sundry Creditors 5002 2,000 2,000
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Grace Period Payables – At the end of the Fiscal Year
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 is 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 4007/4017. Grace period payables are recorded as
expenditure in the prior fiscal year, although transfer and payment are recorded in the next
fiscal year.
Example: In the first 30 days of the fiscal year, a Public Body pays Birr 5,000 for office
supplies that were recorded as grace period payables from the prior year’s capital
expenditure budget.
Transaction # 1: Provision for grace period payables last year.

Last Year's Transaction Register of Public Body:
Dr Cr Dr Cr
JV Office Supplies 2 6212 5,000
Grace period payables 5001 5,000
Transaction # 2:Ppayment and Transfer of funds for grace period payables this year.
This Year's Transaction Register of Public Body:
Dr Cr Dr Cr
BPV Grace period payables 5001 5,000 5,000
This Year's Transaction Register of MOFED:
Dr Cr Dr Cr
BPV Transfer - GPP 4017 5,000 5,000
This Year's Transaction Register of Public Body:
Dr Cr Dr Cr
RV Transfer - GPP 4017 5,000 5,000
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To/From Regions
In this rare case, the item of expenditure is part of the approved budget for the Public Body
and the region is acting as a purchasing agent for the Public Body. The responsibility for the
budgeted expenditure remains with the Public Body, although the payment is executed in
the region.
Example: The Ministry of Education (MoE) sends Birr 50,000 to Amhara Regional Education
Bureau (AREB). The Amhara Regional Education Bureau returns invoices for the books
totaling Birr 47,000 and cash totaling Birr 3,000 to the Ministry of Education.
Transaction #1: Cash is sent to AREB.

Transaction Register of MoE:
Dr Cr Dr Cr
BPV Advance to region 4208 50,000 50,000
Transaction #2: Cash and invoices are received from AREB.

Transaction Register of MoE:
Dr Cr Dr Cr
JV Books 2 6215 47,000
Advance to region 4208 47,000
RV Refund of Balance 3,000
Settlement of account 4208 3,000
To/From Public Bodies
Example: PB # 1 transfers Birr 150,000 to PB # 2 as a temporary financial arrangement.

Transaction Register of PB #1
Dr Cr Dr Cr
BPV Cash transfer to PB # 2 - 4210 150,000 150,000
Transaction Register of PB #2
Dr Cr Dr Cr
RV Cash transfer from PB # 1 - 5028 150,000 150,000
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Deposits
Some Public Bodies collect and return deposits. Deposits are not budgeted.
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.
Receipt and Return of Deposit
Example: A Public Body collects a deposit of Birr 10,000 as bid security. The bid is
unsuccessful and the deposit is returned at a later date.
Transaction # 1: Receipt of Deposit.
Dr Cr Dr Cr
RV Bid Security Deposit 5054 10,000 10,000
Transaction # 2: Refund of Deposit.
Dr Cr Dr Cr
BPV Bid Security Deposit 5054 10,000 10,000
Monthly, the cash balance in the cashbook must be reconciled with the bank account's bank
statement and with the detailed subsidiary records.
VAT deposit
When Inland Revenue collects VAT tax, a portion of the collection can be claimed as a
refund by the taxpayer. The portion that is refundable should be recorded as a deposit
when collected using VAT tax payable account code 5058.
Example: Inland Revenue collects VAT tax of Birr 1,000 for a vehicle sale. 5% of the tax could
be refunded.
Transaction Register of Inland Revenue:
Dr Cr Dr Cr
RV VAT 1277 950
VAT tax payable 5058 50 1,000
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Value Added Tax
Some public bodies provide services and sell goods as part of their regular activities and are
registered as value added tax payers and collect value added tax on behalf of Inland
Revenue Authority and transfer the collected tax periodically to the tax authority.
The Value Added Tax does not reduce the sales price of the service or goods. When a sales is
made 15% value added tax will levied on the full sales price and a total sum of cash will be
collected using Receipt voucher.
Transaction # 1 Ethiopian Radio and Television Agency collects cash from sales of press
revenue of birr 11,500 of which birr 1,500 is VAT.
Transaction Register of Ethiopian Radio and Television Agency:
Dr Cr Dr Cr
RV Press Revenue - 1431 10,000
Vat payable 5059 1,500 11,500
Transaction # 2 Transfer to VAT collection to Federal Inland Revenue Authority

Dr Cr Dr Cr
BPV Transfer to IRA 5059 1,500 1,500
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8 SPECIFIC PURPOSE GRANTS
Specific purpose grants are grants that are used for predefined purposes, such as, Food
Security, Productive Safety Nets, PSCAP, etc. The example below relates to food security.
Budgeting
The Federal budget should include a payment to the Specific Purpose Grant. Expenditure
from the Food Security Fund is budgeted in one expenditure code. However, the payments
are authorized and disbursed by Treasury to various regions. Therefore, each Specific
Purpose Grant must have its own Transfer Recipient code (410-429) and the budget should
use expenditure code 6412 for all Specific Purpose Grants. The funds should be budgeted as
part of the capital budget with a unique 4-digit project code.
For example, 10,000,000 Birr is budgeted to the Food Security Fund as part of the capital
budget. Food Security Fund is assigned Transfer Recipient code 426. The funds are
budgeted as project 9999 to expenditure code 6412.
Payment by MOFED into the Specific Purpose Grant per budget
The funds are never actually paid into a separate fund. The budget is an amount that can be
directed by the Specific Purpose Grant to be paid out of Treasury to others. Therefore, there
is no Specific Purpose Grant receipt or revenue account at the Federal level.
Payment by MOFED out of the Specific Purpose Grant
When directed, Treasury sends cash out to Regions as Specific Purpose Grants. At Central
Accounting Department, the expenditure is recorded as:
Debit to 6412
Credit to 4105
The expenditure is assigned to the Transfer Recipient code for the Specific Purpose Grant
and charged against their budget. A subsidiary ledger is kept for each region.
For example, 2,000,000 Birr is sent to Tigray region for Food Security.
Dr Cr Dr Cr
Payment to Tigray - Food Security - 6412 2,000,000 2,000,000
The payment is charged against the budget of Food Security, code 426, out of the project
code 9999. A subsidiary ledger is kept for Tigray.
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9. CLOSING ENTRY
Special routines are required at the end of the fiscal year to maintain general and subsidiary
ledgers.
Closing an account means setting all temporary account balances to zero by transferring
these balances to the Net Asset/Equity account. Temporary accounts are:
 Revenue/Assistance/Loan accounts (codes 1000 – 3999)
 Expenditure account codes (codes 6000 – 6999)
 Transfer account codes (codes 4000 – 4099)
Permanent account balances are not closed but carried forward to the next fiscal year.
Permanent accounts are:
 All asset accounts, such as cash in safe, bank balance, receivables, etc
 All liability accounts, such as payables, deposits, etc
 Net asset/equity account
The following procedures are carried out prior to closure of accounts:
Step 1: Generate the Sene Monthly Reports
 Reconcile cash balance

o Count cash in safe
o Transfer all suspense payment vouchers from the cashier to the accountant
o Convert all suspense payment vouchers to receivables
 Reconcile the bank balance

o Obtain the bank statement as at 30 Sene
o Update the bank balance by passing entries for interest, bank charges, credit and
debit advises in the General Ledger
o Reconcile the bank balance per statement to the balance per general ledger
 Reconcile transfers
o Obtain transfer details from source/destination reporting units
o Compare details with General Ledger
o Make necessary adjustments using journal vouchers
o Communicate balances to source/destination reporting units
o Ensure transfer account balances agree to balances per source/destination
reporting units.
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 Accrue for grace period payables (payments from prior year’s budget):
o Identify amounts paid for in the month of Hamle (during the grace period) for
goods/services received/rendered in the month of Sene
o Use journal vouchers to accrue for these.
 Reconcile receivables and payables general ledger balances to subsidiary ledger

o For each general ledger account that has subsidiary ledgers, obtain the total of all
the subsidiary ledger accounts
o Ensure that the total of the subsidiary ledger balances is equal to the general
ledger balance and there are no differences
o If there is a difference, review the subsidiary ledger accounts and the general
ledger account for omissions and errors
o If the error/omission is in the general ledger, make a correction entry
o If the error/omission is in the subsidiary ledger, make adjustments directly in the
subsidiary ledger
 Reconcile intra-governmental receivables and payables balances:

o The amount receivable/payable in the books of the reporting unit should be equal
to the amount shown as payable/receivable in the books of the related reporting
unit.
o Obtain the balance per the other reporting unit
o Compare the balance with General Ledger
o Make necessary adjustments using journal vouchers
o Communicate balance to the reporting unit and ensure it makes necessary
adjustments so that balances agree.
 Verify existence of irregular balances by generating an exceptional report detailing

any:
o Debit balances in revenue accounts
o Credit balances in expenditure accounts
o Credit cash in hand and cash at bank balances
o Credit receivables balances
o Debit payables balances
o Balances on fixed assets and stock accounts
 Rectify balances at each step by passing correction entries
 Prepare the Sene monthly report
 Verify the Sene monthly report by reviewing each report for reasonableness and
there is no cause for any investigation/follow up actions.
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Step 2: Prepare Budget vs Expenditure
 Verify that the budgetary institution exists by agreeing the BI code to the budget
notification
 Ensure the amount of the approved budget is accurate by agreeing the amount to the
budget notification
 Verify that all budget transfers have been recorded by comparing records with the
file of Be/Ma 1s.
 Verify and resolve any unbalanced budget transfers.
 Record any omitted budget transfers
 Verify that all budget supplements have been recorded by comparing records with
the file of Me/Be/Ma 6s and Ke/Be/Ma 6s.
 Record any omitted budget supplements
 Prepare the budget vs. expenditure report
 Review the report for reasonableness
 Review the report for over expenditures and investigate and resolve over
expenditures.
 Make adjustments to expenditure if there has been an error in posting to wrong
expenditure account resulting in an over expenditure.
Step 3: Closing Entry

1. After the June monthly report for the fiscal year is accepted by BOFED, prepare a JV
using the June Trial Balance:
Debit: Revenue/assistance/loan
Credit: Expenditure
Debit: Transfers– using the credit amount in the Trial Balance (if any)
Credit: Transfers– using the debit amount in the Trial Balance (if any)
Debit/Credit: Net Asset/Equity account as debit or credit to make the entry balance.
2. Record the above JV into the TR and only post the amount for Net Asset/Equity to the
General Ledger. The other entries for revenue/assistance/loan, expenditures and transfers
should not be posted to the General Ledger for manual users.
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3 Prepare the post closing Trial Balance with the following accounts:
Debit Credit
Cash in Safe XXXX
Cash at Bank XXXX
Receivables XXXX
Payables XXXX
Net assets/equity (Debit or Credit Balance, as the case may be)
4 Carry forward balances in all permanent accounts to the next fiscal year by using
new general ledger cards. The beginning balance (equal to last year's ending
balance) is recorded on the new ledger card.
5 A new transaction register is opened every new fiscal year.
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May 2007 Page 139
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Example
A PB prepares its final Trial Balance for the fiscal year that is accepted by M OFED. The final
Trial Balance shows:
Account Code Account Description Debit Credit
4101 Cash in Safe 5,000
4103 Cash at Bank 100,000
-- Transfers 450,000 3,000,000
-- Receivables 50,000
-- Payables 10,000
-- Revenue/Assistance/Loan: 200,509
-- Expenditure 2,607,974
5601 Net Assets/Equity 2,465
Total 3,212,974 3,212,974
Step 1: Prepare closing entry using a JV as follows:

Description Code Amount
Dr Cr
Revenue/Assist./Loan --- 200,509
Transfer --- 3,000,000 450,000
Expenditure --- 2,607,974
Net Assets/Equity 5601 142,535
Total 3,200,509 3,200,509
Step 2: Record the JV into the TR
Step 3: Post the amount for Net Asset/Equity from the TR to account code 5601 ledger card
only in the General Ledger.
Step 4: Prepare the post closing trial balance as follows:
Account Code Account Description Debit Credit
4101 Cash in Safe 5,000
4103 Bank Balance 100,000
-- Receivables 50,000
-- Payables 10,000
5601 Net Assets/Equity 145,000
Total 1,55,000 1,55,000
Step 5: Carry forward balances in all the permanent accounts to the next fiscal year by using
new general ledger cards.
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May 2007 Page 140
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10 BEGINNING OF YEAR PROCEDURES
Procedures at MOFED
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 IBEX for:
1. Budget identification codes for all Public Bodies and all Reporting Entities.
2. Changes to the Chart of Accounts
3. Annual appropriated budget.
Procedures for all Budget Institutions

Each year must begin with a zero balance in all general and subsidiary ledger cards for :
 Revenue/Assistance/Loan account codes 1000 – 3999.
 Transfer account codes 4000 – 4099.
 Expenditure account codes 6000 – 6999.
Balances in all other account codes carry forward from the end of one fiscal year to the
beginning of 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. A
set of general and subsidiary ledger cards and sets of budget ledger cards should be
prepared at the beginning of each fiscal year as follows:
Step 1 Balances in all permanent accounts should be carried forward to the next fiscal year
by using new general ledger cards. Last year's cards should not be continued to be
used in the following year. The beginning balance (equal to last year's ending
balance) should be recorded on the new ledger card.
Step 2 Expenditure ledger cards for each sub agency using the approved budget
Step 3 Open new general ledger cards and subsidiary ledger cards (as required) for the
following types of account codes as and when they occur during the fiscal year
a. Revenue/Assistance/Loan account codes 1000 – 3999
b. Transfer account codes 4000 – 4099
c. Expenditure ledger cards for each sub agency 6000- 6999
Step 4: 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.
During the course of the year open new general ledger cards and subsidiary ledger cards (as
required) for the other new permanent account codes (that do not have an opening balance
from the previous fiscal year) as and when they occur during the fiscal year
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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.
Opening Cash 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.
Example: A Public Body requests Birr 100,000 from MOFED. MOFED transfers Birr 90,000
because the Public Body has Birr 10,000 as opening balances.
No Description TB Number Others 4105
Dr Cr Dr Cr
1 Cash transfer - 4002 90,000
Non-cash transfer - 4052 10,000
Non-cash transfer - 4055 10,000 90,000
No Description TB Number Others 4103
Dr Cr Dr Cr
1 Non-cash transfer - 4055 10,000
Cash transfer 4002 90,000 90,000
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Opening Balances of Supplies
The ending balance in stock at a Public Body is charged as reduction to the next year's
budget. This deduction is made on Ge/Be/We 11/2 or Ge/Be/We 11/3. 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. Entries are made on the budget ledger card
for the stock item. The value of stock remaining at year-end, as stated on Ge/Be/We 11/2 or
Ge/Be/We 11/3, should be recorded in the "payment received" column of the budget ledger
card even though no payment was received from Treasury Department.
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 non-cash
transfer for recurrent expenditure account code 4052.
Example: Inspectors report Birr 45,000 in stock remaining at a Public Body at the end of the
year. A Public Body requests Birr 100,000 from MOFED. MOFED transfers Birr 55,000
because the Public Body has Birr 45,000 as opening stock balance.
Dr Cr Dr Cr
BA Cash transfer - 4017 55,000 55,000
JV Non-cash transfer - 4052 45,000

Dr Cr Dr Cr
JV Non-cash transfer - 4055 45,000
BPV Cash transfer 4017 55,000 55,000
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May 2007 Page 143

Manual 3 - Federal Accounting System Chapter 10. Transactions

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Manual 3 - Federal Accounting System Chapter 10. Transactions

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Copyright:

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Manual 3 - Federal Accounting System

Chapter 10. Transactions

CHAPTER 10: TRANSACTIONS

1. Cash movements from/to:

7. Receivables and Payables

8. Specific Purpose Grants

10. Beginning of Year Procedures

MOFED to Public Bodies – Zero Balance Accounts

MOFED to Public Bodies - Non Zero Balance Accounts

If the bank charges a service charge for the transfer:

Transaction Register of MOFED:

Public Bodies to Region Sector Bureaus

Bank Accounts within a Public Body – Same Source of Finance

Bank Accounts within a Public Body – Different Sources of Finance

Bank Accounts within a Public Body – Transfer to Branch

Inter Bank Transfers

Cash may be transferred between bank accounts of MOFED

Cash Imprest Payments

Check Deposits into Bank

Transaction Register of MOFED:

Transaction Register of Ministry of Health:

Transaction Register of Customs Authority:

The source document for collection of revenue is a Receipt Voucher.

Direct Deposit of Revenue into MOFED Bank Account

Example: Birr 15,000 is collected by the Community Development Committee in Addis

Community Development Contribution in Kind

In Addis Ababa contribution in kind represents contribution of goods or services or

Scenario 1 Material Contribution

Scenario 2 Labor Contribution

Transaction Register of the Public Body:

Transaction Register of Public Body

Subsidies to Regions by MOFED

Payments by MOFED to Regions are budgeted expenditures of the federal government.

Payments to Transfer Recipients by MOFED

Payments by MOFED to Transfer Recipients (Functional classification 400-499) are budgeted

Cash Payment by Public Body to Region as part of Specific Purpose Grant

Operational Expense without Withholding Tax

Transaction Register of Public Body:

Operational Expense Requiring Withholding of Tax

Operational Expense Requiring Withholding of Tax

Transaction #1: Payment effected to supplier

Transaction # 2: Transfer of Withholding Tax to Federal Inland Revenue Authority

Transaction Register of Ministry of Health: On opening letter of credit

Long-term construction projects involve complicated financial arrangements. Several

Example: Assume the following:

Transaction #1: Payment of 20% advance:

Transaction # 3: Payment certificate when 80% complete.

Transaction # 4: Payment certificate when 100% complete.

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

Transaction #6: Payment of withholding tax to Inland Revenue Authority.

Example: A BI requests salary with the following details:

Withdrawal of Cash from Bank to Pay Salary

Record Debit Advice for Transfer at MOFED

Transaction Register of MOFED

Record Credit Advice for Transfer at PB

Deposit of Staff Loan Recovered into Depositary Bank Account

Deposit of Unpaid Salary into Depositary Bank Account

Record Debit Advice for Transfer at MOFED

Transaction Register of MOFED

Record Credit Advice for Transfer at PB

Payment of unpaid salary

Salary adjustment - Unearned Salary