Accounting Project Level IV

TEWODROS BEKELE KEBEDE
ACCOUNTING LEVEL IV
Organized by Chala U. (MA) in Accounting 1|Page

Level IV Code 01
Project one
Technology TI company engaged with IT activities having five employees who have
different professional. Their name and other important information regarding their payroll
data for the month of April 2011 are represented as follows
S.No Full name BS Allow. OT hrs Duration of OT OT rate
1 Turu Tedla 10,000 2,000
2 Nega Teka 680 ---- 20 Weekend Weekend (2.00)
3 Geleta Temam 4,500 500 10 Up to 10 pm Up to 10 pm (1.25)
4 Yemar Abat 2,600 200 15 10PM to 5 AM 10PM to 5 AM (1.50)
5 Kuli Adamu 1,100 100 10 Public holiday Public holiday ( 2.50)
Additional information
1. All employees are permanent except Nega Teka
2. The workers are expected to work 40 hours in week or 160 hours per month
3. Allowance is excess 800 are taxable
4. All permanent employees contribute 10% of their basic salary to Ethiopian Renaissance
Dam in this month.
5. pension is 70% and 11% employee and employer respectively
Required
a. prepared payroll register sheet
b. Prepared necessary journal entry for preparation of payroll and payments of deduction
to concerned party.
Solution
Gross Earning = BS + Allowance + OT
Basic salary x given hourly rate X relevant OT rate
𝐎𝐯𝐞𝐫𝐭𝐢𝐦𝐞 =
160 ℎ𝑜𝑢𝑟𝑠
1. Turu Tedla = 0
680 x 20 X 2 27,200
2. Nega Teka = = = 170
160 ℎ𝑜𝑢𝑟𝑠 160
4,500 x 10 X 1.25 56,250
3. Geleta Temam = = = 351.56
160 ℎ𝑜𝑢𝑟𝑠 160
2,600 x 15 X 1.50 58,50
4. Yemar Abat = = = 365.63
160 ℎ𝑜𝑢𝑟𝑠 160
1,100 x 10 X 2.50 55,000
5. Kuli Adamu = = = 343.75
160 ℎ𝑜𝑢𝑟𝑠 160

1. Turu Tedla = 10,000 + 2,000 = 12,000
2. Nega Teka = 680 + 0 +170 = 850
3. Geleta Temam = 4,500 + 500 + 351.56 = 5,351.56
4. Yemar Abat = 2,600 + 200+ 365.63 = 3,165.63
5. Kuli Adamu = 1,100 + 100 + 343.75 = 1,543.75
2. 𝐈𝐧𝐜𝐨𝐦𝐞 𝐓𝐚𝐱 = 𝑇𝑜𝑡𝑎𝑙 𝐺𝑟𝑜𝑠𝑠 𝐸𝑎𝑟𝑛𝑖𝑛𝑔 𝑡𝑎𝑥𝑎𝑏𝑙𝑒 𝑥 𝑡𝑎𝑥 𝑟𝑎𝑡𝑒
1. Turu Tedla = 11,200*35% - 662.50 = 3,257.50

2. Nega Teka = 850 * 15% - 47.5 = 80
3. Geleta Temam = 4,851.56*30% - 412.50 = 1,042.97
4. Yemar Abat = 2,965.63*25% - 235 = 506.41
5. Kuli Adamu = 1,443.75*20% - 117.50 = 171.25
3. Pension Contribution = Basic salary*employee PC rate
1. Turu Tedla = 10,000*7% = 700

2. Nega Teka = 0 not permanent employee
3. Geleta Temam = 4,500*7% = 315
4. Yemar Abat = 2,600*7% = 182
5. Kuli Adamu = 1,100*7% = 77
4. Other deduction for Ethiopian renaissance dam = BS * 10%
1. Turu Tedla = 10,000*10% = 1,000

2. Nega Teka = 0 not permanent employee
3. Geleta Temam = 4,500*10% = 450
4. Yemar Abat = 2,600*10% = 260
5. Kuli Adamu = 1,100*10% = 110
5. Total deduction = IT + PC + Other deduction
1. Turu Tedla = 3,257.50 + 700 + 1,000 = 5,057.50

2. Nega Teka = 80
3. Geleta Temam = 1,042.97 + 315 + 450 = 1,807.97
4. Yemar Abat = 506.41 + 182 + 260 = 945.14
5. Kuli Adamu = 171.25 + 77 + 110 = 358.25
6. Net pay = Gross Earning – Total deduction
1. Turu Tedla = 12,000 – 4,957.50 = 7,042.50

2. Nega Teka = 850 – 80 = 770
3. Geleta Temam = 5,351.56 – 1,807.97 = 3,543.59
4. Yemar Abat = 3,165.63 – 948.41 = 2,217.22
5. Kuli Adamu = 1,371.88 – 330.28 = 1,041.60

S.N Full name Earning Gross Deductions Total NP Sig
o BS All. OT Earning IT PC ERD deduction
1 Turu Tedla 10,000 2,000 --- 12,000 3,257.5 700 1,000 4,957.50 7,042.50
2 Nega Teka 680 --- 170 850 80 ---- ---- 80 770.00
3 Geleta Tem 4,500 500 351.56 5,351.56 1,042.97 315 450 1,807.97 3,543.59
4 Yemar A 2,600 200 365.63 3,165.63 506.41 182. 260 948.41 2,217.22
5 Kuli A 1,100 100 171.88 1,371.88 143.28 77 110 330.28 1,041.60
Total 18,880 2,800 1,059.07 22,739.07 5,030.16 1,274 1,820 8,129.16 14,614.9
1
Prepared by ___________ checked by ___________ approved by ___________
Date _______________ Date _______________ Date _______________
Sign. ______________ Sign. ______________ Sign. ______________
Journal Entries
b. If salary is paid in may next month, Journalize
1. To record the Payment of salary expenses for the month
Salary Expenses -----------------------23,746
Income Tax Payable ----------------------------5,598.90
Pension Contribution payable -----------------1,282.02
Cash -----------------------------------------------16,838.04
2. Payment of payable
To record the payroll Tax (employer Pension) expenses
Payroll Tax expenses (18,880*0.11) -------------2,002
Pension Contribution payable----------------------------2,002
3. To record the Ethiopian renaissance dam
Abay Dam Payable---------------------1,820
Cash --------------------------------------------1,820
4. Payroll tax or company pension contributions
To record the payment of payroll tax and withholding tax to the Inland Revenue authority
Pension Contribution payable------------------3,276
Cash------------------------------------------------------8,306.16

Project Two
The following accounts are perform in the ledger of Qeerroo Hotel at May 31.2017 and none
of the end adjustments have been recorded.
Cash----------------------------------------------- 9,410
Fees receivable ----------------------------------48,310
Supplies ------------------------------------------ 675
Prepaid insurance --------------------------------3,725.00
Prepaid advertising ------------------------------1,000
Unearned rent ------------------------------------1,000
Capital ------------ --------------------------------42,810
Fees earned ---------------------------------------62,250
Salary expenses ---------------------------------41,700
Advertising expenses ---------------------------10,340
Insurance expense -------------------------------
Supplies expense --------------------------------
Rent income -------------------------------------9,100
a. Unbilled fees at May 31, 2014 birr 7,750.00
b. Inventory of supplies May 31, 2014 birr 190.00
c. Birr 2,100.00 of insurance has expired during the year
d. Out of a Prepayment of birr 1,000.00 for advertising space in Ethiopian herald
newspaper 75% has been used and the remaining will be used un the following year
e. Salary accrued at May 31, 2014 birr 1,140.00
f. Rent collected in advance that will not be earned until the following year birr 700.00
g. The company is registered for tax as per the Ethiopian tax law
Required
Pass the necessary adjusting entries based on the above information
Prepare profit and loss statement and balance sheet
Adjusting Entry Solution
a. Fees Receivable --------------------- 7,750
Fees revenue---------------------------------------------------7,750
b. Supplies Expense ---------------------485
Supplies-----------------------------------------------------------485
c. Insurance Expense ---------------------2,100
Prepaid Insurance-------------------------------------------2,100
d. advertising Expense ---------------------750
Prepaid advertising -----------------------------------------750
e. salary Expense --------------------------1,140
Salary Payable -----------------------------------------------1,140
f. unearned rent ----------------------------700
Rent income --------------------------------------------------700

Fees /receivable Supplies P/ insurance P/advertising Salary payable
48,310 675 485 3,725 2,100 1,000 750 1,140
7,750 190 1,625 250 1,140
56,060
Unearned rent Rent income Fees revenue Salary exp. Advert. exp
300 1,000 9,100 62,250 41,700 750 10,340
700 300 7,750 1,140 750
9,400 70,000 42,840 11,090
Insurance exp. Supplies exp.

2,100 485
2,100 485
Qeerroo Hotel Companies

Adjusted Trial Balance
May 31, 2014
Cash -------------------------------------------------9,410
Fees/R-----------------------------------------------56,060
Supplies----------------------------------------------190
Prepaid insurance ----------------------------------1,625
Prepaid Advertising -------------------------------250
Salary payable-------------------------------------------------------1,140
Unearned Rent ------------------------------------------------------700
Capital ----------------------------------------------------------------42,810
Rent Income --------------- ------------------------------------------9,400
Fees Revenue --------------------------------------------------------70,000
Salary Expenses (41,700 + 1,140) ----------------42,840
Advertising Expenses (10,340 + 750) ------------11,090
Insurance Expenses ---------------------------------2,100
Supplies Expenses ---------------------------------485
Total 124,050 124,050

Profit/ Loss Statements
For the month ended May 31, 2014
Revenue
Fees Earned ------------------------------------70,000
Rent Income ------------------------------------9,400
Total Revenue ------------------------------------------------------------------- 79,400
Operating Expenses
Salary Expenses -----------------------------42,840
Advertising ------------------- ----------------11,090
Insurance Expenses -------------------- ------2,100
Supplies Expenses ---------------------------485
Total Expenses------------------------------------------------------------------- (56,515)
Net income before tax------------------------------------------------------------22,885
Income tax = Net income after tax *30% = 22,885*30--------------------6,865.50
Net income after tax-------------------------------------------------------------- 16,019.50

Statement of owner’s equity
May 31, 2014
Beginning capital ---------------------------------------------------------------42,810
Add. Net income ----------------------------------------------------------------16,019.50
Ending capital May 31, 2014--------------------------------------------------- 58,829.50

Balance Sheet
May 31, 2014
Cash -------------------------------------------------2,544.50
Fees/R-----------------------------------------------56,060
Supplies----------------------------------------------190
Prepaid insurance ----------------------------------1,625
Prepaid Advertising -------------------------------250
Total Assets----------------------------------------60,669.50
Liabilities
Salary payable--------------------------------------1,140
Unearned Rent -------------------------------------700
Total Liabilities------------------------------------2,140
Shareholders’ Equity
Capital ---------------------------------------------- 58,829.50
Total Liabilities + Shareholders’ Equity ---------60,669.50

Project Three
Pointer PLC has the following financial information for April 30, 2012
Cash at bank account of the depositor’s record
 Cash in bank account as of April 1, 2012 ……………………………….. 7,817.40
 Cash receipt journal as during April 30, 2012 …………………………….. 7,829.50
Deposit tickets collected from bank Check Register

Date Amount Ck. Number Amount
April 1, 2012 848,63 740 842.50
April 3, 2012 914.04 741 501.90
April 8, 2012 840.50 742 671.30
April 10, 2012 971.71 743 506.88
April 15, 2012 975.85 744 415.91
April 24, 2012 946.74 745 490.90
April 22, 2012 897.34 746 1016.90
April 24, 2012 942.71 747 1217.33
April 29, 2012 510.06 748 249.75
749 172.75
750 1021.90
751 359.60
752 601.50
753 486.39
Bank statement for April

 Balance as of April a, 2012 ………………………………………… 7,947.20
 Deposits and other credits ……………………………………….. 10,652.77
 Checks and other debits …………………………………………… (8,232.21)
Balance of April 30, 2012 ………………………………………… 10,367.76
Deposits of April Check accompanying April bank statement
Date Amount Ck. Number Amount
April 1, 2012 690.25 731 162.015
April 2, 2012 848.63 738 251.40
April 4, 2012 914.04 739 60.55
April 9, 2012 840.50 740 842.65
April 11, 2012 971.71 741 501.90
April 16, 2012 975.85 742 671.30
April 18, 2012 946.74 743 506.88
April 23, 2012 897.34 744 415.91
April 25, 2012 942.71 745 490.90
746 1016.90
747 1217.33
748 249.75
750 1021.90
753 486.39

Bank Memo Accompanying April Bank Statement
Date description
Amount
April 4, 2012 Bank credit Memo for notes collected
Principal ……………………………………………………. 2,500.00
Interest …………………………………………………………. 125.00
April 24, 2012 Bank debit memo for check returned because of insufficient funds…………. 311.80
April 30, 2012 bank debit memo for service charge ………………………………….……… 24.50
Pointer PLC
Bank Reconciliation
March 31, 2012
Balance per Bank statement ………………………………………………………… 7,947.20
Add: outstanding deposit ………………………………………….…………………. 690.25
Total ……………………………………………………………………. 8,637.45
Deduct: outstanding checks
Ck. 731 …………………………………………. 162.50
Ck. 736 ………………………………………… 345.95
Ck.738 ………………………………………… 251.40
Ck. 739 ………………………………………….. 60.55 820.05
Adjusted Balance ……………………………………………………………………….. 7,817.40
Balance per depositors ………………………………………………………………….. 7,832.50
Deduct: service charge ……………………………………………………………………. 15.10
Adjusted Balance ………………………………………………………………………… 7,817.40
Required
1. Prepare Bank Reconciliation statement for the Month of April 2012
2. Record the necessary Journal entries
Answer
1. The bank was record up to April 25, 2012 only therefore April 29, 2012 the amount
510.06 is not recorded by bank.
2. The check registered by bank not cleared from bank is check No. 749, 751 and 752
which amounted = 172.75 + 359.60 + 601.50 = 1,133.85
3. The other check No. 736, amounted 345.95 was not cleared from bank
Then the Total check outstanding = 1,133.85 + 345.95 = 1,479.80
4. Cash book account (balance per bank statements) = cash balance of April 1, 2012,
plus cash receipt deduct the total amount of check registered.
= 7,817.40 + 7,847.58 – 8555. 51 = 15664.83 - 8555. 51 = 7, 109. 32

Pointer PLC
Bank Reconciliation
April, 30 2012
Balance per Bank Statement --------------------------------------------------10,367.76
Add. Deposit not recorded by bank ------------------------------------------------510.06
Subtotal ------------------------------------------------------------------------------10,877.82
Deduct: - check outstanding -------------------------------------------------------- (1,479.80)
Adjusted balance ----------------------------------------------------------------------9,398.02
Balance per Bank depositor recorded ------------------------------------------------ 7,109.32
Add. Note receivable --------------------------------------- 2,500
Interest income ----------------------------------------- 125 ---------------------2,625
Subtotal -------------------------------------------------------------------------------9,734.32
Deduct; - Bank service -------------------------------------24.50
NSF-----------------------------------------------311.80 ------------------ (336.30)
Adjusted balance ------------------------------------------------------------------------ 9,398.02
Journal entries
1. Cash in bank --------------------------------2,625
Note receivable ------------------------------------- 2,500
Interest income --------------------------------------125
2. Misc. expenses-------------------24.50
NSF-------------------------------311.80
Cash in bank ---------------------------------------336.30
Project four
Kality steel manufacture product A and B the budget department of the factory has the
following information at the beginning of the account year
Product. A Product B
Desired inventory for each month in units ------------20,000 10,000
Estimated beginning inventory for each month--------21,000 9,000
Selling price per units -------------------------------------50 70
Estimated sales in unit during the current quarter
Area 1 January February March Total

A 6,500 6,900 6,600 20,000
B 1,950 1,500 1,500 4,950
Area 2 January February March Total

A 2,500 3,000 4,500 10,000
B 500 600 1,500 2,600
For the product of A and B Kality steel factory use the following raw material
Materials Units cost A B
Sand 0.50 20kg per unit 15kg per unit
Steel 1.00 10kg per unit 15kg per unit
Chemicals 5.00 10kg per unit 15kg per unit
Organized by Chala U. (MA) in Accounting 10 | P a g e

Required
1. Prepare sales budget for the current quarter
2. Prepare production budget for the current quarter
3. Prepare raw material purchase budget for the current quarter
Solution
Prepare sales budget for the current quarter
Sales budget = selling price x units sold
Units sold A = 20,000
Units sold B = 4,950
S.n Area 1 Types of product Selling price Unit sold Total sales/ revenue
1 A 50 20,000 1,000,000
2 B 70 4,950 354,500
Total 120 24,950 1,354,500
S.n Area 2 Types of product Selling price Unit sold Total sales/ revenue
1 A 50 10,000 500,000
2 B 70 2,600 182,000
Total 120 12,600 682,000
2. Prepare production budget for the current quarter
Production budget in units = budget sales + target ending FGI – Beginning FGI
Unit of finished goods to be produce/Production budget in units = budget sales + target
ending FGI – Beginning FGI
Production budget in units A= 20,000 + 20,000 - 21,000 = 19,000
Production budget in units B= 4,950 + 10,000– 9,000 = 5,950
Total Production budget in units (A +B) = 19,000 + 5,950 = 24,950 OR
Production budget in units = 24,950 + 30,000 – 30,000
Production budget in units = 24,950
Production budget in units A= 10,000 + 20,000 - 21,000 = 9,000

Production budget in units B= 2,600 + 10,000– 9,000 = 3,600
Total Production budget in units (A +B) = 9,000 + 3,600 = 12,600 OR
Production budget in units = 12,600 + 30,000 – 30,000 = 12,600
Production budget in units = 12,600

3. Prepare raw material purchase budget for the current quarter
Area 1 Activities Materials for A Total
Sand Steel Chemical
Unit to be produced 19,000 19,000 19,000
Direct material per units *20 *10 *10
Material to be purchased 380,000 190,000 190,000
Cost per unit *0.50 *1 *5
Total Purchased Cost 190,000 190,000 950,000
Area 1 Activities Materials for B Total

Sand Steel Chemical
Direct material per unit *15 *15 *15
Total Purchased Cost 89,249.50 89,249.50 446,250
Sand = 380,000 +380,000 = 760,000
Total Material to be purchased Steel = 190,000 + 89,250 = 279,250
For area 1 Product A and B chemical = 190,000 + 89,250 = 279,250
Sand = 190,000 +89,249.50 = 279,249.50
Total purchased cost budget Steel = 190,000 +89,249.50 = 279,249.50
For area 1 Product A and B chemical = 950,000 + 445,250 = 1,395,250
Area 2 Activities Materials for A Total

Sand Steel Chemical
Area 2 Activities Materials for B Total

Sand Steel Chemical
Total Material to be purchased Sand = 180,000 +54,000 = 234,000

For area 1 Product A and B Steel = 190,000 + 54,000 = 244,000
chemical = 190,000 + 54,000 = 244,000
Sand = 90,000 +27,000 = 117,000
Total purchased cost budget Steel = 90,000 +54,000 = 117,000
For area 1 Product A and B chemical = 450,000 + 270,000 = 720,000

Project Five
During the month of January the following transaction will occur to produce three product
1. Raw material purchase on accounts
Sand --------------------------------------------------- 500
Steel ----------------------------------------------------790
Chemicals ----------------------------------------------4,500
2. Material used and direct factory labour cost used
Material direct labour cost
Job. #1 227.50 160
Job. #2 780 210
Job. #3 3,900 175
3. Factory overhead is 80% of direct labour cost
4. Sold finished products of birr 7,800
Required
1. Record the necessary journal entry for the above transaction
2. Calculate the job of each job
3. Calculate the amount of profit
Solution
1. Record the necessary journal entry for the above transaction
I. Raw material Purchase
Sand --------------------------------------- 500
Steel ----------------------------------------790
Chemicals ---------------------------------4,500
Account payable -------------------------------------------5,790
II. (A) Materials issued (used) to work in process
Job #1 work in process --------------------227.50
Direct material inventory-----------------------------227.50
Job #3 work in process --------------------780
Direct material inventory-----------------------------780
Job #3 work in process --------------------3,900
Direct material inventory-----------------------------3,900
(B) accrued payroll (for labour cost)

Wage payable -----------------------------------------160
Wage payable ------------------------------------210
Wage payable -----------------------------------------175
III. Factory overhead applied (80%) of direct labour cost
Factory overhead -----------------------------128

IV. Cash ------------------------------------------7,800
Sales --------------------------------------------------7,800
2. Calculate the cost of each job

Total cost of each job = material cost + direct labour cost + factory overhead cost
Job. #1 = 227.50 + 160 + 128 = 515.50
Job. #2 = 780 + 210 + 168 = 1,158
Job. #3 = 3,900 + 175 + 140 = 4,215
Total cost of all jobs/cost of Goods Sold = 515.50 + 1,158 + 4,215 = 5,888.50
1. Calculate the amount of profit
Gross profit = 7,800 – 5,888.50 = 1,911.50
Project six
Maru Merchandising is a VAT registered company has the following transaction for the of
month march 2013
March 15 received cash from sales of furniture birr 250,000

March 16 paid entertainment expenses birr 5,000
March 19 purchase raw materials for birr 49,000 on cash
March 25 paid salary expenses for the period 60,000
March 26 sales of furniture on account birr 80,000
March 27 paid utilities expenses for the period of birr 25,000
March 31 supplies expenses during the month of March 20,000
March 31 doubtful account expenses for the period id birr 8,000
Required
1. Record the above entries in a journal entry form

2. Calculate the amount of VAT receivable/ payable from/to ERCA
3. Prepare income statement for the month of march 2013 for tax purpose and calculate
the profit tax liabilities ( profit tax)

Solution
1. Record the above entries in a journal entry form
March 15 Cash ------------------------------------------------287,500
VAT payable (250,000*0.15) --------------------------------37,500
Sales ------------------------------------------------------------250,000
March 16 entertainment expense----------------------------5,000
Cash----------------------------- --------------------------------5,000
March 19 purchase -----------------------------------------49,000
VAT receivable (49,000*0.15) ---------------7,350
Cash -----------------------------------------------------------56,350
March 25 salary expense-----------------------------------60,000
Cash----------------------------- --------------------------------60,000
March 15 account receivable-------------------------------92,000
VAT payable (92,000*00.15) --------------------------------12,000
Sales ------------------------------------------------------------80,000
March 27 utilities expense----------------------------------25,000
Cash----------------------------- --------------------------------25,000
March 31 supplies expense----------------------------------20,000
Cash----------------------------- --------------------------------20,000
March 31 Doubtful account expense------------------------8,000
AFDA----------------------------- ------------------------------8,000
T- Accounts
Cash A/Receivable VAT /Rec. AFDA VAT/Payable

287,500 5,000 92,000 7,350 8,000 37,500
56,350 92,000 7,350 8,000 12,000
60,000 49,500
25,000
20,000
287,500 146,350
141,150
Sales Purchase Ent. Exp Salary Exp. Utility Exp.

250,000 49,000 5,000 60,000 25,000
80,000 49,000 5,000 60,000 25,000
330,000
Supply Exp. AFDA Exp.

20,000 8,000
20,000 8,000

Maru Merchandising Companies
Trial Balance
March 31, 2013
Cash --------------------------------121,150
A/R-----------------------------------92,000
VAT/Receivable -------------------7,350
AFDA------------------------------------------------------------------------8,000
VAT payable ----------------------------------------------------------------49,500
Sales --------------------------------------------------------------------------330,000
Purchase -----------------------------49,000
Entertainment Expenses -----------5,000
Salary Expenses --------------------60,000
Utilities Expenses ------------------25,000
Supplies Expenses -----------------20,000
Doubtful Acc. Exp. ----------------8,000 _______
Total 387,500 387,500
2. Calculate VAT receivable
Output VAT (sales) = 330,000*15% = 49,500

Input VAT (purchase) = 49,000*15% = 7,350
VAT payable = Output VAT - Input VAT
VAT payable = 49,500- 7,350
= 42,150
Maru Merchandising Companies
Income statement
For the month ended March 31, 2013
Sales -------------------------------------------------330,000
Less; - Purchase (CGS) ----------------------------------- (49,000)
Gross Profit ---------------------------------------- 281,000
Salary Expenses --------------------60,000
Utilities Expenses ------------------25,000
Supplies Expenses -----------------20,000
Total expenses-------------------------------------- (105,000)
Income before Tax--------------------------------- 176,000
Income Tax (30%) ---------------------------------52,800
Net Income -------------------------------------------123,200

Project Seven
XYZ Company Purchase commodity A for resale during the month of October 2015 during
the month of October the following transaction is occurred in relation to company A
October 1. Inventory ------------------------ 15 units@30

October4. Sales------------------------------- 5 units@35
October 10. Purchase ----------------------- 10 units@32
October 17. Sales----------------------------- 12 units@39
October 22. Sales------------------------------3 units@40
October 30. Purchase ----------------------- 10 units@33
Required
1. XYZ Company using periodic Inventory system and FIFO costing Method
Calculate
a. Cost of goods sold
b. Cost of inventory on hand at the end of the October
c. Determine the amount of Gross Profit
2. XYZ Company using perpetual Inventory system and LIFO costing Method
Calculate
a. Cost of goods sold during October
b. Cost of inventory on hand at the end of the October
c. Determine the amount of Gross Profit
Solution
1. periodic Inventory system FIFO
 start from the most recent purchase and continue the next recent and old purchase are
sold
 No continuous record of merchandise
 Physical inventory must take to determine cost of inventory
Under periodic Inventory system FIFO
October 1. Inventory ------------------------ 15 units@30------------------450
October 10. Purchase ----------------------- 10 units@32-------------------320
October 30. Purchase ----------------------- 10 units@33-------------------330
35 1,100
October 4. Sales------------------------------- 5 units@35---------------- 175
October 17. Sales----------------------------- 12 units@39----------------468
October 22. Sales------------------------------3 units@40------------------120
20 763, (net sales)
Unit Remainder on hand = UAFS – Units Sold
= 35 – 20
= 15 units on hand

The most Recent Cost Oct. 30------------10@33-------------------------330
The next Recent Oct. 10 ------------------5@32---------------------------160
15 490
Cost of goods Sold = Beginning Inventory + Net purchase – Ending Inventory
Cost of goods Sold = 450 + (330 + 320) or 650 – 490 = 1,100 – 490 = 610
Gross Profit = Net Sales – CGS = 763 – 610 = 153
2. XYZ Company using
Perpetual Inventory system LIFO costing Method
Date Purchase CGS ( sales Inventory

Qty UC TC Qty UC TC Qty UC TC
Oct.1 15 30 450
4 5 35 175 10 30 300
10 10 32 320 10 30 300
10 32 320
17 10 32 320 8 30 240
2 30 60
22 3 30 90 5 30 150
30 10 33 330 5 30 150
10 33 300
Cost of goods sold = 175 + 320 + 60 +90 = 645

Cost of inventory on hand at the end of the October = 150 + 300 = 450
Determine the amount of Gross Profit
Gross Profit = Net Sales – CGS = 763 – 645 = 118

Code 02 Process Payroll
S.No Employee Name Basic salary Overtime worked Allowance
01 Roza Yohannes 7,500 1500 Position

1,250 Transport
1,000 House
02 Haile Selam 2,827 5hrs Holy day (2.5 30% BS Hard ship
03 Yohanis Abera 5,052 4hrs Evening(1.25 40% BS Hard ship
2hrs Night (1.5)
04 Nuguse Yidego 1,455 12hrs Weekend (2)
1. All employees are permanent Except Nuguse Yidego and worked 40hrs per week
2. During Ginbot 2007 all workers have done as they have been expected
3. Yohanis Abera monthly pay birr 750 from his basic salary for credit Association
4. Assuming that pension contribution 7% of employee and 11% of Employer.
Required
a. Prepare payroll register sheet
b. Prepared journal entries for Preparation payroll and payment of deduction to
concerned party
Solution
Gross Earning = BS + Allowance + OT Pension Contribution
S. Full Earning Gross Deductions Total NP Sig

N name BS All. OT Earning IT PC Cred. deduct.
Asso.
01 Roza 7,500 1500 -- 11,250 2,925 525 -- 3,450 7,800
1250
1000
02 𝐇𝐚𝐢𝐥𝐞 2,827 848.10 220.86 3,895.96 526.97 179.89 --- 724.86 3,171.10
03 Yohans 5,052 2,202.8 252.60 7,325.40 1,194.11 353.64 750 2297.75 4932.92
04 Niguse 1,455 ----- 218.25 1,673.25 217.15 ----- --- 217.15 1456.10
Total 16,834 6,618.9 691.71 24,049.89 4,556.205 1,076.53 750 6,759.76 17,384.85

Date _______________ Date _______________ Date _______________
Sign. ______________ Sign. ______________ Sign. ______________

Journal Entries
Salary Expenses -----------------------24,144.61
Pension Contribution payable -----------------1,076.53
Credit association payable ---------------------750
Cash -----------------------------------------------17,384.85
Payroll Tax expenses (16,379*0.11) -------1,691.69
Pension Contribution payable----------------------------1,691.69
3. To the credit association payable
Credit association payable ------------------750
Cash ----------------------------------------------------750
4. To record the payment of payroll tax and withholding payment
Income tax payable -------------------------4,933.23
Pension payable -----------------------------2,768.22
Cash---------------------------------------------------7,701.45
Project Two: - Sales Budget

Expected monthly Sales of Monera mechanization are as follows
1. October ----------------------------------- birr 5,000,000
2. November ---------------------------------birr 4,000,000
3. December ----------------------------------birr 3,500,000
Management expects future sales collection past experience 80% on cash sales 20% on credit
sales, and credit sales will be collected 80% on current month 10% collect on the next month
and the remaining balance collected on the following month.
Required
1. Prepare sales budget
2. Prepare sales collection budget
3. Determine the receivable balance

Solution
1. Prepare sales budget
Monera Mechanization Company
Sales budget
For the month of Oct. Nov & Dec.
October November December Total
Sales 5,000,000 4,000,000 3, 500, 0000 12,500,000
Sales on cash (at 80%) 4,000,000 3,200,000 2,800,000 10,000,000
Sales on credit (at 20%) 1,000,000 800,000 700,000 2,500,000
Total Sales 5,000,000 4,000,000 3,500,000 12,500,000
2. Prepare sales collection budget
Cash (collection) budget
Current Sales on cash (at 80%) 4,000,000 3,200,000 2,800,000

Sales collection on credit (at 80%) 800,000 640,000 560,000
Collection on credit (at 10%) -------- 100,000 100,000
Collection on credit (at 10%) ------- ------- 80,000 80, 000
------ 70,000 70,000
Total collection 4,800,000 3,940,000 3,540,000 150,000 70,000
3. Determine the receivable balance

150,000 + 700,000 = 220,000
Receivable = Total sales – Total collection = 12,500,000 – 12,280,000 = 220,000
Project Three: - Manufacturing cost

The following data pertain to the operation of Nobel Company manufacturing furniture of
Dec. 2001
Direct material used----------------------------birr 243,000
Direct labour cost ------------------------------birr 236,000
Total FOHs--------------------------------------birr 288,000
Beginning Inventory work in Process-------birr 188,000
Ending Inventory work in Process----------birr 122,000
Beginning Inventory finished Goods-------birr 20,000
Ending Inventory finished Goods-----------birr 25,000
Sales--------------------------------------------------1,246,000
Selling expenses ------------------------------------265,000
Administrative --------------------------------------87,000
Required
1. Prepare cost of goods manufactured
2. Prepare income statements

Solution
1. Prepare cost of goods manufactured
a. Total manufacturing cost = DMC + DLC +Total FOHs
= 243,000 + 236,000 + 288,000
= 767,000
b. Cost of manufacture = beginning IWIP + TMC - EWIP
= 767,000 + 118,000 – 122,000
= 763,000
c. Cost Goods Sold = Cost of manufacture + BIFG – EIFG
= 763,000 + 20,000 – 25,000
= 758,000
2. Prepare income statements
Nobel Company manufacturing

Income statement
For the month ended
Sales ------------------------------------------------------1,246,000
Less; - CGS------------------------------------------------------- (758,000)
Gross Profit on sales------------------------------------488,000
Less; selling expense -------------------- 265,000
Administrative expenses----------87,000
Total expenses -------------------------------------------------- (352,000)
Income before tax -----------------------------------------------136,000
Business Profit tax (30% * 136,000) ------------------------- (40,800)
Net Income --------------------------------------------------------95,200
Project Four; - Bank Reconciliation

Tsagaye Trading has received his bank pass sheets foe the year to 31 October 2015. As the
date his balance at the bank amounted to birr 14,130 where his own cash book showed a
balance of birr 47,330. His accountant investigated the matter and discovered the following
discrepancies.
a. Bank charges of birr 60 had not been entered in the cash bank
b. Checks drawn by Tsagaye & totalling 450 had not yet presented to the bank
c. Tsagaye had not entered receipts of birr 530 in his cash book from credit customer
d. The bank had not credit Tsagaye with receipts of birr 1,970 paid to the bank on 31st
Oct. 2015
e. Payment of creditors amounting birr 1,240 had not been entered in the cash book
f. Tsagaye had entered payment of wage expenses birr 560 in his cash books as birr 650
g. Checks received for birr 300 from debtors had been returned by the marked “ refer to
drawer” but this had not been written back in the cash book
h. Checks totalling birr 6,585 draw on 29th October for payment of Notes payable had
been debited instead of credited
i. Deposits in transit October 31, totalled birr 880
j. Some of Tsagaye customers had paid to settle their deposits by direct debit.
Unfortunately the bank had credited some direct debits amounting to birr 16,650 to
another customer’s account.

Required
1. Bank Reconciliation for Tsagaye trading at November 30, 2015
2. Prepare the general journal entries necessary to bring the cash in bank account into
agreement the adjustment
Solution
Tsagaye Trading
Bank Reconciliation
October 31, 2015
Balance per Bank Statement ------------------------------------------------------ 14,130
Add. Deposit not recorded by bank ------------------------------1,970
Deposit in transit ---------------------------------------------880
Bank error ----------------------------------------------------16,630 ------------19,480
Subtotal ------------------------------------------------------------------------------------33, 610
Deduct: - check outstanding -------------------------------------------------------------450
Adjusted balance ---------------------------------------------------------------------------33,160
Balance per Bank depositor recorded ------------------------------------------------- 47,950
Add. Collected by bank --------------------------------------530
Depositor error------------------------------------------90
Subtotal ------------------------------------------------------------------------------------48,570
Deduct; - payment to creditors --------------------------- 1,240
Bank service -------------------------------------60
Refers return drawer ---------------------------300
Depositor error --------------------------------- 13,170 -------------------- (14,770)
Adjusted balance ---------------------------------------------------------------------------33,160
Journal entries
3. Cash in bank --------------------------------620
Collection from customer -------------------------------530
Account Payable ------------------------------------------90
4. Payment creditors -------------------------1,240
Miscellaneous expenses-------------------60
Refers return drawer-----------------------300
Account payable ---------------------------13,170
Cash in bank ---------------------------------------14,770
Project Four Inventory
Consider the following data for XYZ Company:
Date purchase Sold units
Jan1 Balance 200 units@ birr 9
Jan 15 300 units @ birr 10
Jan 19 No purchase 600 units

Required
1. Using periodic inventory system & FIFO method determine cost of goods sold and
cost ending inventory
2. Using perpetual inventory system & LIFO method determine cost of goods sold and
cost ending inventory
Solution
1. Periodic inventory system & FIFO method
Units remaining on hand = BI + Net purchase – Ending Inventory
Then Net purchase = 300 units + 400 units + 100 units = 800 units are purchased
Units remaining on hand = BI + Net purchase – Ending Inventory (unit sold)
Units remaining on hand = 200 units + 800 units – 600 units
= 1000 units – 600 units
= 400 units on hand
The most recent July 25, --------------------- 100@12 = 1,200
The most next recent July 19, ----------------- 300@11 = 3,300
Total 400 units’ 4,500 costs of ending inventory
Cost of Goods Sold = CMAFS – Cost of ending Inventory
Jan1 Balance 200 units@ birr 9

Jan 19 No purchase 600 units
Jan 1. Beginning Inventory ------------200@9 = 1800
Jan 15. Purchase ------------------------300@10 = 3000
Jan 18. Purchase ------------------------400@11 = 4400
Jan 25. Purchase ------------------------100@12 = 1200
Total 1000 10,400 cost manufacturing available for sales
Cost of Goods Sold = CMAFS – Cost of ending Inventory
Cost of Goods Sold = 10,400 – 4,500
= 5,900
Cost of ending Inventory = 300*11 + 100*12 = 3300+ 1200 = 4,500

2. Perpetual inventory system & LIFO method
Date Purchase CGS ( sales Inventory

Qty UC TC Qty UC TC Qty UC TC
Jan. 1 200 9 1800
15 300 10 3000 200 9 1800
300 10 300
18 400 11 4400 200 9 1800
300 10 300
400 11 4400
19 400 11 4400 200 9 1800
200 10 2000 100 10 1000
25 100 12 1200 200 9 1800

100 10 1000
100 12 1200
Cost of Goods Sold = 4400 + 200 = 6,400

Cost Ending Inventory = 1800 + 1000 + 1200 = 4,000

CODE 03
Project one
The chamber of commerce has two exhibition centres
A. Addis Ababa exhibition centres B. millennium hall exhibition centres
Addis Ababa exhibition centres millennium hall exhibition centres
Fixed cost = 2,000 Fixed cost = 6,000
Variable cost = 80 Variable cost = 60
NB selling price = 120 for both centres

Administration cost = 3,500
Band budget = 2,500
Required
1. Find breakeven point at A and B
2. Find the profit when 150 and 300 customers attend respectively
3. At what level the two operating income will be the same
Solution
Total budget = Administration cost + Band budget
Total cost = 3,500 + 2,500 = 6,000
Fixed cost = 2,000 + 6,000 = 8,000 Fixed cost = 6,000 + 6,000 = 12,000
VC = 80/units VC = 60/units
SP = 120/units SP = 120/units
SP – VC – FC = 0 SP – VC – FC = 0
120Q – 80Q – 8,000 = 0 120Q – 60Q – 12,000 = 0
120Q – 80Q = 8,000 120Q – 60Q = 12,000
40Q/40= 8,000/40 60Q/60= 12,000/60
Q = 200 units Q = 200 units
If 150 customer attended
SP*Q – VC *Q– FC = 0 SP*Q – VC *Q– FC = 0
120*150 – 80*150 – 8,000 120*150 – 60*150 – 12,000
18,000 – 12,000 – 8,000 = (2,000) 18,000 – 9,000 – 12,000 = (3,000)

120*300 – 80*300 – 8,000 120*300 – 60*300 – 12,000
36,000 – 24,000 – 8,000 = 4,000 36,000 – 18,000 – 12,000 = 6,000
3. At what level the two operating income will be the same

 At breakeven points
Project Two: - Accounting Cycle

Huluka Company
Unadjusted Trial balance
For the year ended July 31, 2010
Account Title Dr Cr
Cash ------------------------------------------------3,425
A/R -------------------------------------------------7,000
Supplies --------------------------------------------1,270
Prepaid insurance ---------------------------------620
Office equipment’s -------------------------------51,650
Accumulated depreciation -----------------------------------------------------9,700
A/P --------------------------------------------------------------------------------925
Unearned Fees -----------------------------------------------------------------1,250
Capital ---------------------------------------------------------------------------29,000
Drawing -----------------------------------------5,200
Fees Earned ---------------------------------------------------------------------59,125
Rent Expenses ----------------------------------4,200
Wages expenses --------------------------------22,415
Utilities expenses -------------------------------2,715
Misc. expenses ----------------------------------1,505
Total 100,000 100.000
a. Supplies on hand are birr 380
b. Insurance premium expired is birr 315
c. Depreciation on equipment is 4,950
d. Wage accrued but not paid during the period is birr 440
e. Accrued fees earned but not recorded is birr 1,000
f. Unearned fees during the period is birr 500
Instruction
1. Journalize the adjusting entries

2. Prepare income statements, statements of owner’s equity, and balance sheet
3. Journalize the closing entries
4. Journalize the post-Trial balance
Solution

1. Journalize the adjusting entries
a. Supplies expenses ---------------- 890
Supplies ---------------------------------------890
b. Insurance expenses ----------------315
Prepaid insurance ---------------------------315
c. Depreciation expenses ------------4,950
Accumulated Depreciation ------------------------4,950
d. Wage expenses ---------------------440
Wage payable --------------------------------440
e. Account Receivable ---------------1,000
Fees Earned ----------------------------------1,000
f. Unearned Fees ----------------------500
Fees earned -----------------------------------500
Supplies prepaid insurance Fees/R accum. Depn

1,270 890 620 315 7,000
4,950
380 305 1000
9,700
8,000
14,650
Office equipment. Insurance exp. Wage exp. Fees earned
51,650 315 440 59,125
440 500
51,650 315
1,000
60,625
Unearned fees A/P. Capital Drawing

500 1,250 925 29,000 5,200
750 925 29,000 5,200
Wage Exp. Rent Exp. Utilities Exp. Deprn Exp.

22,415 4,200 2,715 4,950
440 4,220 2,715 4,950
22,855
Supplies Exp Insurance Exp Msc. Exp.

315 1,505
890
890 315 1,505

Huluka Company
Account Title Dr Cr
Cash ------------------------------------------------3,425
Fees/R ----------------------------------------------8,000
Supplies --------------------------------------------380
A/P --------------------------------------------------------------------------------925
Wage Payable --------------------------------------------------------------------440
Unearned Fees -------------------------------------------------------------------750
Capital ---------------------------------------------------------------------------29,000
Drawing -----------------------------------------5,200
Fees Earned ---------------------------------------------------------------------60,625
Wage Expenses ---------------------------------22,855
Rent Expenses ----------------------------------4,200
Utilities Expenses ------------------------------2,715
Deprn. Expenses ---------------------------------4,950
Supplies expenses --------------------------------890
Insurance expenses ------------------------------315
Misc. expenses ----------------------------------1,505
Total 106,390 106,390
Huluka Company
Income Statements
Revenue
Fees Earned --------------------------------------------------------------------60,625
Operating Expenses
Wage Expenses ---------------------------------22,855
Rent Expenses ----------------------------------4,200
Deprn. Expenses ---------------------------------4,950
Misc. expenses ----------------------------------1,505
Total Expenses ------------------------------------------------------------- (37,430)
Net Income -------------------------------------------------------------------23,195
Huluka Company
Statements of Owners Equity
Beginning Capital ------------------------------------------------------29,000
Net Income -------------------23,195
Less Drawing-----------------------5,200
Increase Owners Equity by --------------------------------------------17,995
Ending Capital of Huluka Company July 31, 2010 -------------------------46,995

Huluka Company
Balance sheet
For July 31, 2010
Cash ------------------------------------------------3,425
Fees/R ----------------------------------------------8,000
Supplies --------------------------------------------380
Office equipment’s -------51,650
Accumulated deprn------- (14,650) -------------37,000
Total Assets--------------------------------------- 49,110
Liabilities
A/P -------------------------------------------------925
Wage Payable -------------------------------------440
Unearned Fees ------------------------------------750
Total Liability---------------------------------2,115
Owners’ Equity
Capital --------------------------------------46,995
Total Liability + Owners’ Equity ------49,110
Closing Entry
1. Fees Earned ------------------------60,625
Income summary ----------------------------60,625
2. Income summary -----------------37,430
Wage Expenses ---------------------------------22,855
Rent Expenses ----------------------------------4,200
Deprn. Expenses ---------------------------------4,950
Misc. expenses ----------------------------------1,505
3. Income summary ----------------23,195
Capital ----------------------------------------23,195
4. Capital ------------------------------5,200
Drawing------------------------------------5,200
Huluka Company
Post-Closing Trial balance
Account Title Dr Cr
Cash ------------------------------------------------3,425
Fees/R ----------------------------------------------8,000
Supplies --------------------------------------------380
A/P --------------------------------------------------------------------------------925
Wage Payable --------------------------------------------------------------------440
Unearned Fees -------------------------------------------------------------------750
Capital ---------------------------------------------------------------------------29,000
Total 63,760 63,760

Project Three Process Payroll
S.No Employee Basic Presentational Fuel OT hours Duration of OT

Name salary allowance Allowance worked works rate
01 Tola 5,500 750 200 litters ---- --- --
02 Chala 3,500 350 150 litters 6hrs Weekend 2
03 Bontu 850 --- --- 10hrs 10pm to 6am 1.5
04 Kena 2,800 150 100 litters 6hrs Holiday 2.5
05 Hordofa 1,500 --- 50 litters 6hrs Holiday 2.5
1. The managements of the company except all employees to work 40hrs per week and all
employees have worked as they have expected.
2. Bontu is a causal employee
3. Tola and Chala contribute 10% of their basic salary to credit Association as monthly
saving whereas Kena contribute 5% of his basic salary
4. Up to 1000 birr fuel allowance is exempted from tax and the swelling price of one litters
is birr 20
5. Assuming that pension contribution 6% of employee and 9% of Employer.
Required
a. Prepare payroll register sheet
b. Pass the necessary journal entry
Solution
S. Full Earning Gross Deductions Total NP Si

N name BS Present Transp. OT Earning IT PC Cred. deduct. g
ation. All. Asso.
All.
01 Tola 5,500 750 4000 -- 10,250 2,312.50 330 550 3,192.50 7,057.50
02 Chala 3,500 350 3000 262.50 7,112.50 1,354.38 210 350 1,914.38 5,198.12
03 Bontu 850 --- ----- 79.6875 929.6875 91.95 ---- -- 91.95 837.74
04 Kena 2,800 150 2000 262.50 5,212.50 806.25 𝟏𝟔𝟖 75 1,049.25 4,163.25
05 Hord. 1,500 --- 1000 140.625 2,640.625 210.63 90 ---- 375.63 2,265
Total 14,150 1,250 10,000 745.3125 26,145.32 4,775.71 798 975 6,623.71 19,521.61

Date _______________ Date _______________ Date _______________
Sign. ______________ Sign. ______________ Sign. ______________

Journal Entries
Salary Expenses -----------------------26,145.32
Pension Contribution payable -----------------798
Credit Association -------------------------------975
.Cash -----------------------------------------------19,521.61
Payroll Tax expenses (14,150*0.09) -------1,270.50
Pension Contribution payable----------------------------1,270.50
Credit association payable ------------------975
Cash ----------------------------------------------------975
Pension payable -----------------------------1,270.50
Cash---------------------------------------------------6,049.21
Project Four
Bank Reconciliation
The following information is given
 Balance per bank statements is 26,465.50
 Deposit in transit is 2.148.21
 Bank error which will be added is 270
 Checks outstanding is 8,003.84
 Balance per depositor recorded is 17,324.40
 Notes plus Interest of 150 is 3,650
 Depositor error which will be deducted is 75.78
 Bank service charge is 18.75
Instruction
1. Prepare bank Reconciliation
2. Pass the necessary journal entries

Solution
1. Prepare bank Reconciliation
XYZ Company
Bank Reconciliation
For ended June 30, 2015
Balance per bank statements is ------------------------------------26,465.50
Add. Deposit in transit -------------------------- 2,148.21
Bank error ----------------------------------270--------------------2,418.21
Subtotal ------------------------------------------------------------ 28,883.71
Deduct; checks outstanding-----------------------------------------------8,003.84
Adjusted Balance ---------------------------------------------------------20,879.87
Balance per depositor recorded --------------------------------------17,324.40

Add. Note plus Interest ---------------------------------------------- 3,650
Subtotal -------------------------------------------------------- 20,974.40
Deduct; depositor error----------------------------75.78
Bank service charge--------------------- 18.75------------94.53
Adjusted Balance ---------------------------------------------------------20,879.87
2. Pass the necessary journal entries
a. Cash in bank…………………………..3650
N/R………………………..………………….3000
Interest income…………………………………360
b. Misc. expenses -----------------------------18.75
A/p--------------------------------------------75.78
Cash in bank --------------------------------------------94.53
Project Five
Revenue Recognition method
Assume that in the first year operation a dealer in house hold appliances had total instalment
sales of birr 300,000 and the cost of the merchandise sold amounted birr 180,000. Assume
also that collection of the instalment account receivable were spread over three years as
follows
1st year birr 140,000
2nd year birr 100,000
3rd year birr 60,000
Instruction
1. Find the Gross profit at points of sales method
2. Find the Gross profit under instalments method

Solution
1. Find the Gross profit at points of sales method
Gross profit = Sales – cost of goods sold
Gross profit = 300,000 – 180,000
Gross profit = 120,000
𝐺𝑟𝑜𝑠𝑠 𝑝𝑟𝑜𝑓𝑖𝑡 120,000
= = 0.4 or 40%
𝑠𝑎𝑙𝑒𝑠 300,000
1st year collection 140,000*0.4 = 56,000
2nd year collection 100,000*0.4=40,000
3rd year collection 60,000*0.4 =24,000
Total 300,000 120,000
Project Six: - Inventory System

The following information is given
Jan.1 beginning Inventory ---------------------------------200 units @9
Jan.10 purchase-----------------------------------------------300 units @10
The physical account on December 31 shows that 300 units of particular commodity are on
hand using periodic FIFO method
1. Calculate the cost of Goods sold
2. Calculate the Gross profit if selling price per unit is birr 15
3. Calculate the business profit tax assume the administration cost is 2,500 from this birr
900 birr is for personal investment. ( use 30% profit tax rate)
4. Find the Gross profit under instalments method
Solution
1. Calculate the cost of Goods sold
FIFO method is the most recent
Jan.29 purchase----------------------------100 units @12----------1,200
Jan.15 purchase----------------------------200 units @11----------2,200
Total ----------------------------------------300 23 3,400
Cost of Ending Inventory = 3,400
Cost of merchandise available for sales
Jan.1 beginning Inventory -------------200 units @9-------------- 1,800
Jan.10 purchase--------------------------300 units @10-------------3,000
Total --------------------------------------1,000 42 10,400

Cost of merchandise available for sales = 10,400
Cost of Goods sold = CMAFS – Cost of Ending Inventory
Cost of Goods sold = 10,400 – 3,400
Cost of Goods sold = 7,000
Units of sales = Total CMAFS – Total unit of Ending inventory
Units of sales = 1,000 – 300
Units of sales = 700
Total sales = Units of sales*selling price
Total sales = 700*15 = 10,500
Gross Profit = Net Sales – CGS
Gross Profit = 10,500 – 7,000 = 3,500
Gross Profit-------------------------------------- 3,500
Less; general Expenses (2,500 – 900) ------------- (1,600)
Income Before tax -------------------------------1,900
Less; business profit tax (1,900*30%) -------------- (570)
Net Income -----------------------------------------1,330

CODE 4
Project One; - Perform Cost of Accounting and Planning
The following data is related to Tullu wood work shop for the month of March 2014
 Beginning direct material inventory------------------100,000
 Ending direct material inventory---------------------17,000
 Beginning WIP inventory------------------------------31,000
 Ending WIP inventory----------------------------------29,000
 Beginning FG inventory--------------------------------62,000
 Ending FG inventory------------------------------------48,000
 direct Labour---------------------------------------------80,000
 direct material used-------------------------------------142,000
 Indirect material used----------------------------------9,000
 Indirect Labour------------------------------------------12,000
 Other manufacturing overhead-------------------------27,000
Task 1.1 calculate the cost of goods manufactured and calculate cost of goods sold for
given period
Solution
Total manufacturing Cost = DM used + DL cost + FOH
FOH = indirect material + indirect labour + indirect manufacturing cost
FOH = 9,000 + 12,000 + 27,000 = 48,000
Total manufacturing Cost = 142,000 + 80,000 + 48,000

Total manufacturing Cost = 270,000
Cost of Goods Sold = Beg. FG Inventory + Total manufacturing Cost – End. FG inventory
Cost of Goods Sold = 62,000 + 270,000 – 48,000
Cost of Goods Sold = 313,000 – 48,000
Cost of Goods Sold = 286,000
NB; -
Cost of Direct Material Used in Production = Direct Material Purchases + Direct Material
Beginning Inventory − Direct Material Ending Inventory
The next step is to calculate the budgeted cost of goods manufactured as follows:
Manufacturing Cost = Cost of Direct Material used in Production + Direct Labour Cost
+ Factory Overhead Cost
Cost of Goods Manufactured = Manufacturing Cost + Beginning Work in Process − Ending
Work in Process
Assume XYZ Company manufacturing and sells adding machine. The companies income
statements for the most recent year is given below

Per units Total cost
Sales (40,000 units ) 40 1,600,000
Variable expenses 30 1,200,000
Contribution margin 10 400,000
Fixed Expenses 240,000
Net income 160,000
Task 1.2 based on the above data perform the following task compute the companies Break
even points both in unit and sales birr.
Solution
𝐹𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡
Breakeven points in units =
𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑚𝑎𝑟𝑔𝑖𝑛 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡
Contribution Margin per units = selling price per unit – variable cost per unit
Contribution Margin per units = 40-30 = 10 units
𝐹𝑖𝑥𝑒𝑑 𝑐𝑜𝑠𝑡
Breakeven points in units =
𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛 𝑚𝑎𝑟𝑔𝑖𝑛 𝑝𝑒𝑟 𝑢𝑛𝑖𝑡
240,000
Breakeven points in units = = 24,000 units
10
Breakeven points in dollar (sales) = Breakeven points in units* selling price per unit
Breakeven points in dollar (sales) = 24,000* 40 = 960,000
Task 1.3 compute cash disbursement in August
Langano Trading has the following purchases budget for the last half of 2015
July ------------------ birr 100,000 October -----------------------------90,000
August ---------------80,000 November ---------------------------100, 0000
September -----------110,000 December ---------------------------94,000
Solution
July August September October November December
100,000 80,000 110,000 90,000 100,000 94,0000
------- 40,000 55,0000 45,000 50,000 47,000
50,000 50,000 40,000 55,000 45,000 50,000
90,000 95,000 90,000 95,000 97,000 47,000
Task 1.4 if the company pays one half at time of purchase and the remainder in month
following purchase.
Calculate the expected cash disbursement for purchase in August = 90,000

Project Two
Process business document and financial reports
July 01. Bacha invested birr 40,000 in cash to form Bacha Website Design.
July 02. Order office supplies birr 5,200
July 03. Rent an office pays two months’ rent in advance birr 3,200
July 05. Received office supplies Ordered on July 2 and an invoice for birr 5,200
July 09. Made partial payment for the amount owed for the office supplies received on July 5
Birr 2,600
July 10. Performed service for an automobile dealer by designing a website and collects a
fee in cash birr 2,800
July 12. Purchased office equipment’s birr 16,320
July 15. Performed service for department store by designing website bills for the fee new but
will not collects the fee later birr 9,600
July 19. Accepted an advance fee a deposited on website to be designed birr 1,400
July 22. Received cash from customers previously billed on July 15 birr 5,000
July 26. Paid for employees four weeks wages 4,800
July 30. Received but doesn’t pay the utility bill that due next month birr 680
July 31. Bacha withdraw birr 2,800 in cash
Instruction
Record the journal entry, post to ledger and prepare unadjusted Trial balance
Additional Information
1. Expiration of one months’ rent birr 1,600
2. Consumption of office supplies birr 1,540
3. Depreciation office equipment’s birr 300
4. Accrued of unrecorded wages of birr 720
5. Perform service for which cash was received in advance birr 800
6. Accrued of unrecorded revenue of birr 400

Solution
1. Record the journal entry
July 01. Cash---------------------- 40,000
Bacha capital------------------------40,000
July 02. No entry
July 03. Rent expenses ----------------3,200
Cash ----------------------------------------3,200
July 05. Office supplies ----------------5,200
A/P----------------------------------------5,200
July 09. A/P-------------------------------2,600
Cash -----------------------------------2,600
July 10. Cash ----------------------------2,800
Service revenue ------------------------2,800
July 12. Office equipment’s --------- 16,320
Cash ---------------------------------16,320
July 15. A/R ----------------------------9,600
Service revenue ----------------------9,600
July 19. Cash ----------------------------1,400
Unearned service revenue ----------------1,400
July 22. Cash ----------------------------5,000
A/R ----------------------------------5,000
July 26. Wages expenses --------------4,800
Cash -------------------------------4,800
July 30. Utility expenses---------------680
A/P---------------------------------------680
July 31. Bacha’s drawing --------------2,800
Cash ------------------------------------2,800
2. Transaction are posted to the ledger (posting)
Cash
40,000 3,200 A/R Office Equipment
2,800 2,600 9,600 16,320
5,000
1,400 16,320 16,320
5,000 4,800 4,600
2,800
49,200 29,720
19,480
Office supply
Prepaid rent A/P
5,200
3,200 2,600 5,200
5,200 680
3,200 2,600 5,880
3,200

Unearned S/R Capital
Drawing
1,400 40,000
2,800
40,000
1,400
2,800
S/ Revenue
Drawing Wage exp.
2,800 Utilities expenses
9,600 2,800 4,800
12,400 680
2,800 4,800
680
Bacha Website Design

July 31, 2010
Dr Cr
Cash ------------------------------------------------19,480
A/R -------------------------------------------------4,600
Supplies --------------------------------------------5,200
Prepaid rent ----------------------------------------3,200
A/P ----------------------------------------------------------------------------------3,280
Unearned service revenue---------------------------------------------------------1,400
Drawing -------------------------------------------2,800
Capital--------------------------------------------------------------------------------40,000
Service revenue---------------------------------------------------------------------12,400
Wage Expenses ----------------------------------4,800
Utilities Expenses --------------------------------680
Total 57,080 57,080
The adjusting entries
a. rent expenses ---------------------- 1,600
Prepaid rent ---------------------------------------1,600
b. supply expenses ------------------1,540
Prepaid insurance ---------------------------1,540
c. Depreciation expenses ------------300
Accumulated Depreciation ------------------------300
d. Wage expenses ---------------------720
Wage payable --------------------------------720
e. Unearned service revenue --------800
Service revenue ----------------------------------800
f. service revenue --------------------400
Service revenue ----------------------------------400

A/R Prepaid rent Office supplies. Accum. Deprn.
4,600 3,200 1,600 5,200 1,540 300
400 1,600 3,660 300
5,000
Service revenue wage payable unearned S/R
12,400 800 1,400 Deprn. Exp.
720 300
400 600
720
800 300
13,600
Wage exp. Supply exp.
Rent 1,540 exp. 1,600
720 1,540
4,800 1,600
5,520
Adjusted Trial balance
July 31, 2010
Dr Cr
Cash ------------------------------------------------19,480
A/R -------------------------------------------------5,000
Supplies --------------------------------------------3,660
Prepaid rent ----------------------------------------1,600
Accumulated depreciation ------------------------------------------------------300
A/P ---------------------------------------------------------------------------------3,280
Wage /P ----------------------------------------------------------------------------720
Unearned service revenue--------------------------------------------------------600
Drawing -------------------------------------------2,800
Capital--------------------------------------------------------------------------------40,000
Service revenue---------------------------------------------------------------------13,600
Wage Expenses ----------------------------------5,520
Rent Expenses ----------------------------------- 1,600
Supply Expenses ---------------------------------1,540
Depreciation exp. ---------------------------------300
Utilities Expenses -------------------------------- 680
Total 58,500 58,500
Income Statements
Revenue
Service revenue ------------------------------------------------------------13,600
Operating Expenses
Wage Expenses ----------------------------------5,520
Rent Expenses ----------------------------------- 1,600
Supply Expenses ---------------------------------1,540
Depreciation exp. ---------------------------------300
Utilities Expenses -------------------------------- 680
Total Expenses ------------------------------------------------------------- (9,640)
Net Income -------------------------------------------------------------------3,960

Statements of Owners Equity
Net Income -------------------3,960
Less Drawing-----------------------2,800
Ending Capital Bacha Website Design July 31, 2010 --------------------41,160
Balance sheet
For July 31, 2010
Cash ------------------------------------------------19,480
Fees/R ----------------------------------------------5,000
Supplies --------------------------------------------3,660
Prepaid rent ----------------------------------------1,600
Office equipment’s (16,320 – 300) -------------16,020
Total Assets------------------------------------------------------- 45,760
Liabilities
A/P ------------------------------------------------3,280
Wage Payable -------------------------------------720
Unearned service revenue------------------------600
Total Liability-------------------------------- 4,600
Owners’ Equity
Capital --------------------------------------41,160
Total Liability + Owners’ Equity ---------------------45,760
Project Three: - Revenue Recognition

The first year of operational hope company dealer of house hold appliance had a total
instalment sales of birr 800,000 with a related cost of birr 480,000 of merchandise sold. The
collection of the instalment account receivable as spread over three years as follows.
1st year br. 300,000 2nd year br. 280,000 3rd year br. 220,000
Instruction show your computation clearly for the following tasks
Task 1: - compute the gross profit recognize at the point of sale
Task 2: - compute the gross profit recognized for each year based on the instalment method
Answer
a. At a point of sale method
Instalment sales ---------------------------------800,000
Cost of merchandise sold ----------------------480,000
Gross Profit---------------------------------------320,000

b. Instalment method
Instalment method = = = 0.4 = 40%
𝑖𝑛𝑠𝑡𝑎𝑙𝑙𝑚𝑒𝑛𝑡 𝑠𝑎𝑙𝑒𝑠 800,000
1st year collection = 300,000*40% = 120,000

2nd year collection = 280,000*40% = 112,000
3rd year collection = 220,000*40% = 88,000
Total 800,000 320,000
Project Four
Inventory system
Abdi Boru PLC had the beginning inventory and purchase during the month of December 30,
2015 are given the company uses the periodic inventory system.
Unit unit cost
Dec.1 Inventory 200 Br. 10
Dec.10 purchase 350 Br. 11
At the end of the months physical account of the remaining inventory items shows that 650
units are on hand. The company’s uses periodic FIFO cost assumption.
Task 4.1 compute the cost of merchandise sold and cost of ending inventory on Dec. 2015
Task 4.2 compute the Gross profit of Abdi Boru Company for the month of inventory on Dec.
2015 assuming the sales price is br. 20 for the merchandise sold
Task 4.3 compute the business profit tax if the company has incurred birr. 3,500 general
expenses including 1,000 entertainment expenses during the fiscal year.
Answer
Unit unit cost Total cost
Dec.1 Inventory 200 Br. 10 2,000
Dec.10 purchase 350 Br. 11 3,850
Total 1,600 18,750
Periodic FIFO
The most recent, July 28 -----------------------500*13 = 6,500
The next most recent July 20 ------------------150*12 = 1,800
Total 650 8,300
Cost offending inventory = 8,300

Cost of cost goods sold = CMAFS - Cost offending inventory
Cost of cost goods sold = 18,750 – 8,300
Cost of cost goods sold = 10,450
1. Net sales
Net sales = unit to be sold*selling price
Unit to be sold = 1,600 – 650 (950) = 950*20 = 19,000
Gross Profit = Net sales - Cost of cost goods sold

Gross Profit = 19,000 – 10,450 = 8,550
2.
Gross Profit------------------------------------------------ 8,550
Less: General expenses (3,500 – 1,000) ---------------1,500
Income before ----------------------------------------------7,050
Less: Business profit tax = 7,050*30% ---------------- 2,115
Net income -------------------------------------------4,935
Project Five
XYZ agency government enterprises pays the salary of employees as per the Ethiopian
calendar months. The agency has an eight working hours per day and five working days per
week.
S.No Full name BS Month OT hrs Duration
Allow. of OT work
1 Hawi 7,800 1,000 ---- ----
2 Ware 4,000 800 10 Public holiday
3 Sorsa 2,800 600 8 Up to 10 pm
4 Gelane 1,800 200 6 10PM to 5 AM
5 Momina 600 200 10 Weekend
1. All employees are permanent
2. Gelane agreed to contribute monthly birr 50 from her salary to credit association
3. The workers are expected to work 40 hours per week or 160 hours per month
4. Allowance is excess 800 are taxable
Required
a. prepared payroll register sheet for the month of Tir 2008
b. record the payment of salary as Tir 2008
c. record the payroll tax expenses as Tir 2008
d. record the payment of payroll withholding to concerned bodies, assuming the
payment was made on yekatit sa15, 2008

Answer
S.N Full name Earning Gross Deductions Total NP Sig
o BS All. OT Earning IT PC CA deduction
1 Hawi 7,800 1,000 --- 8,800 2,137.50 546 --- 2,683.50 6,116.5
2 Ware 4,000 800 625 5,425 975 280 --- 1,255 4,170
3 Sorsa 2,800 600 175 3,575 508.75 196 --- 704.75 2,870.25
4 Gelane 1,800 200 101.25 2,101.25 262.75 126 50 435.75 1,665.50
5 Momina 600 200 75 875 53.75 42 --- 95.75 779.25
Total 17,000 2,800 976.25 20,776.2 3,937.75 1,190 50 5,174.75 15,601.50
5
Date _______________ Date _______________ Date _______________
Sign. ______________ Sign. ______________ Sign. ______________
Journal Entries
1. To record the salary expenses for the month
Salary Expenses -----------------------20,776.25
Pension Contribution payable -----------------1,190
Credit association Payable --------------------- 50
Cash -----------------------------------------------15,601.50
Payroll Tax expenses (17,000*0.11) -------------1,870
3. To record the credit association payable
Credit association payable ---------------------50
Cash ---------------------------------------------------50
4. Payroll tax or company pension contributions
To record the payment of payroll tax and withholding tax to the Inland Revenue authority
Pension Contribution payable------------------3,060
Cash------------------------------------------------------6,997.50

Code 05
Assumption:
Bishoftu Chamber of commerce is planning to organize Easter trade exhibitions. There are
two possible venues/location.
a. Bishoftu Addis Ababa exhibition centre which has fixed rental cost of birr 4,000 plus
a charge of birr 160/person for its own catering of meals, serving if drinking and
entertainments.
b. Tommy hotel hall which has fixed rental cost of birr 12,000. The chamber of
commerce can hire a caterer for meals and waiters and waitresses to serve drinking &
meals at birr 90/person.
The chamber of commerce budget birr 7,000 cost for administration & marketing. The band
will cost a fixed amount of birr 5,000. The ticket to this prestigious event will be birr
240/person. All the drink served and prizes given away at the event will be
donated/sponsored.
Required
1. Compute the breakeven point for each location in terms of number of ticket sold
2. Compute the operation income on the event if 300 person are attend the trade
exhibition. Compare and comment on the result for Addis Ababa exhibition and
Tommy Hotel hall
Answer
Solution
Bishoftu exhibition centres Tommy Hotel Hall
Total budget = Administration cost + Band budget Total budget = 7,000 + 5,000 = 12,000
Total budget = 7,000 + 5,000 = 12,000 Fixed cost = 12,000 + 12,000 = 24,000
Fixed cost = 4,000 + 12,000 = 16,000 VC = 90/units
VC = 160/units SP = 140/units
SP = 240/units
SP – VC – FC = 0 SP – VC – FC = 0
240Q – 160Q – 16,000 = 0 240Q – 90Q – 24,000 = 0
240Q – 160Q = 16,000 240Q – 90Q = 24,000
80Q/80= 16,000/80 150Q/150= 24,000/150
Q = 200 ticket Q = 160 ticket
Bishoftu exhibition centres Tommy Hotel Hall
240*300 – 160*300 – 16,000 240*300 – 90*300 – 24,000
72,000 – 48,000 – 16,000 = 8,000 72,000 – 27,000 – 24,000 = 21,000

Project Two
Prepare Business Documents and Financial Reports
Three years ago Gadisa, Bona and Mesfin Established GELETA Private limited company. At
June 30, 2010 the end of the current fiscal year the GELETA trial balance shows the
following balances.
GELTA Private limited company
Trial Balance
June 30, 2010
Account tittle Dr Cr
Cash 3,425
Fees receivable 7,000
Supplies 1,270
Prepaid insurance 620
Office equipment’s 51,650
Accumulated deprn. 9,700
Account payable 925
Unearned fees 1,250
Geleta Capital 29,000
Geleta Drawing 5,200
Fees earned 59,125
Wage expense 22,415
Rent expense 4,200
Utility expense 2,715
Misc. expense 1,505
Total 100,000 100,000
The following data are additionally information for adjustments required on June 30, 2010
a. Supplies on hand June 30, 2010 are birr 380
b. Insurance premium expired during the is birr 315
c. Depreciation of equipment’s during the year is birr 4,950
d. Wage accrued not paid at June 30, 2010 is birr 440
e. Accrued fees earned but not recorded at June 30, 2010 are birr 1,000
f. Unearned fees on June 30, are birr 750
Required
1. Journalize the adjustment
2. Prepare income statement , owner’s equity statement and balance sheet
3. Journalizing closing entries
4. Prepare the post-closing trial balance

Answer
The adjusting entries
g. supplies expenses ---------------------- 890
Supplies ---------------------------------------890
h. insurance expenses ------------------315
Prepaid insurance ---------------------------315
i. Depreciation expenses ------------4,950
Accumulated Depreciation ------------------------4,950
j. Wage expenses ---------------------440
Wage payable --------------------------------440
k. Fees receivable --------------------1,000
Fees earned ----------------------------------1,000
l. Unearned fees ----------------------500
Service revenue ----------------------------------500
Fees/R Office supplies. Accum. Deprn.

7,000 1,250 890 9,700
1,000 380
4,950
8,000
14,650
Prepaid insurance wage payable unearned fees Deprn. Exp.

620 315 440 500 1,250 4,950
440 750
305 4,950
Wage exp. Supply exp. Insurance exp. Fees earned.

22,415 890 315 59,125
440 1,000
890 315
22,855 500
60,625

GELETA Private limited company
Adjusted Trial Balance
June 30, 2010
Cash 3,425
Supplies 380
Account payable 925
Wage payable 440
Unearned fees 750
Geleta Drawing 5,200
Fees earned 60,625
Wage expense 22,855
Rent expense 4,200
Depreciation expenses 4,950
Supplies exp. 890
Insurance expense 315
Misc. expense 1,505
Total 106,390 106,390

Income Statements
For the year ended June 30, 2010
Revenue
Fees earned ------------------------------------------------------------60,625
Operating Expenses
Wage expense 22,855
Rent expense 4,200
Depreciation expenses 4,950
Supplies exp. 890
Insurance expense 315
Misc. expense 1,505
Total Expenses ------------------------------------------------------------- (37,430)
Net Income -------------------------------------------------------------------23,195

Income Statements
For the year ended June 30, 2010
Net Income -------------------23,195
Less Drawing-----------------------5,200
Ending Capital Bacha Website Design July 31, 2010 --------------------46.995

Balance sheet
June 30, 2010
Cash ------------------------------------------------3,425
Fees/R ----------------------------------------------8,000
Supplies --------------------------------------------380
Office equipment’s (51,650 – 14,650) ---------37,000
Total Assets------------------------------------------------------- 49,110
Liabilities
A/P ------------------------------------------------925
Wage Payable ------------------------------------440
Unearned fees-------------------------------------750
Total Liability-------------------------------- 2,115
Owners’ Equity
Capital --------------------------------------46,995
Total Liability + Owners’ Equity ---------------------49,110
Closing Entries
a. Fees earned -----------------------------60,625
Income summary ---------------------------60,625
b. Income summary -----------------------37,430
Wage expense --------------------------------- 22,855
Rent expense----------------------------------- 4,200
Utility expense--------------------------------- 2,715
Depreciation expenses ----------------------- 4,950
Supplies exp. --------------------------------- 890
Insurance expense ---------------------------- 315
Misc. expense--------------------------------- 1,505
c. Income summary ----------------------23,195
Capital ---------------------------------------23,195
d. Capital ---------------------------------5,200
Drawing -------------------------------------5,200

Post-closing Trial Balance
Post-closing Trial Balance
For the month ended June 30, 2010
Cash 3,425
Supplies 380
Account payable 925
Wage payable 440
Unearned fees 750
Total 63,760 63,760
Project Two:- Plan and manage customer account

The first year of operational Glorious company dealer of house hold appliance had a total
instalment sales of birr 600,000 with a related cost of birr 360,000 of merchandise sold. The
collection of the instalment account receivable as spread over three years as follows.
1st year br. 280,000 2nd year br. 200,000 3rd year br. 120,000
Instruction show your computation clearly
a. what is the gross profit recognize based on the point of sale method
b. What will the gross profit recognized for each year instalment based instalment
method
c. Determine receivable balance
Answer
a. At a point of sale method
Instalment sales ---------------------------------600,000
Cost of merchandise sold ----------------------360,000
Gross Profit---------------------------------------240,000
b. Instalment method
Instalment method = 𝑖𝑛𝑠𝑡𝑎𝑙𝑙𝑚𝑒𝑛𝑡 𝑠𝑎𝑙𝑒𝑠 = = 0.4 = 40%
600,000
1st year collection = 280,000*40% = 112,000

2nd year collection = 200,000*40% = 80,000
3rd year collection = 120,000*40% = 48,000
Total 600,000 240,000

Project Four
Design and develop accounting systems and Inventory management
Brothers trading PLC uses periodic inventory system. It is beginning and purchase during the
month of July, 2014 were as follows.
Unit unit cost
July.1 Inventory 300 Br. 8
July.15 purchase 350 Br. 11
Additional Information
At the end of the months physical account of the remaining inventory items shows that 630
units are on hand. The company’s uses periodic FIFO inventory method.
Required (tasks)
Task 4.1 what will be the cost of merchandise sold and cost of ending inventory on July. 2014
Task 4.2 assuming the sales price is br. 20 of the merchandise inventory calculate the Gross
profit of Brothers Company for the month on July. 2014
Task 4.3 the company has incurred birr. 2,500 general expenses including 900 entertainment
expenses during the fiscal year. Calculate the business profit tax using 30% tax rate.
Answer
1.
Unit unit cost Total cost
Dec.1 Inventory 300 Br. 8 2,400
Total 1,650 18,800
Periodic FIFO
The most recent, July 28 -----------------------550*13 = 7,150
The next most recent July 20 ------------------80*12 = 960
Total 630 8,110
Cost offending inventory = 8,110
Cost of cost goods sold = CMAFS - Cost offending inventory

Cost of cost goods sold = 18,800 – 8,110
Cost of cost goods sold = 10,690
2. Net sales
Net sales = unit to be sold*selling price
Unit to be sold = 1,650 – 630 (1,020) = 1,020*20 = 20,400
Gross Profit = Net sales - Cost of cost goods sold

Gross Profit = 20,400 – 10,690 = 9,710
3.
Gross Profit------------------------------------------------ 8,710
Less: General expenses (2,500 – 900) ---------------1,600
Income before ----------------------------------------------8,110
Less: Business profit tax = 8,110*30% ---------------- 2,433
Net income -------------------------------------------45,677
Project Five: - Perform Payroll accounting and tax calculation
Kiya International Company is a private limited company incorporated under the Ethiopian
law. The following information was taken from the payroll register of sene 30, 2006E.C.
S.N Employee Name Basic allowance OT hours Duration of

o salary Presentational Fuel in litre worked works
01 Dawit Kebede 5,500 750 200 litters ---- ---

02 Abebe Ayala 3,500 350 150 litters 6hrs Weekend
03 Chaltu tufa 850 --- --- 10hrs 10pm to 6am
04 Meseret Lema 2,800 150 100 litters 6hrs Holiday
05 Selamawit Beleta 1,500 --- 50 litters 6hrs Holiday
The corporation employees work 8hrs in days and the during month there are 160 working
hours. Chaltu Tufa is a contract employee, Dawit, Abebe and Meseret contribute 20% of their
monthly basic salary for saving And Credit Association while Selamawit 5%. It is presumed
that an employee who has got fuel allowance up to birr 1,000 enjoys tax exemption and the
current price of a fuel is 20/litre payment is also affected on the pay day.

a. Ethiopian income tax proclamation No. 286/2002
Employment income /per month) Income tax payable (%)
0-150 Exempted Threshold
151-650 10%
651-1400 15%
1401-2350 20%
2351-3550 25%
3550- 5000 30%
Above 5000 35%
b. Over time rate

Overtime duration Rate
6PM – 10PM 1.25
10PM – 6AM 1.50
Weekend 2.00
Public Holiday 2.50
c. Pension contribution
From Employee ------------------6%

From Employer -------------------8%
Required
Unless the payment is tax exempted the employer is responsible for calculating and
withholding from every payment to an employee and to forward it to Ethiopian revenues
and the custom authority (ERCA) within 30 days of the ends of each calendar month.
Assume yourself as an accountant of the aforementioned company.
1. Prepare payroll sheet for the month of Sene, 2006

2. Record the transaction on the pay day
3. Record the payment of withholding

Answer
S. Full Earning Gross Deductions Total NP Si

N name BS Present Transp. OT Earning IT PC Cred. deduct. g
ation. All. Asso.
All.
01 Tola 5,500 750 4000 -- 10,250 2,312.50 330 550 3,192.50 7,057.50
02 Chala 3,500 350 3000 262.50 7,112.50 1,354.38 210 350 1,914.38 5,198.12
03 Bontu 850 --- ----- 79.6875 929.6875 91.95 ---- -- 91.95 837.74
04 Kena 2,800 150 2000 262.50 5,212.50 806.25 𝟏𝟔𝟖 280 1,254.25 3,958.25
05 Hord. 1,500 --- 1000 140.625 2,640.625 210.63 90 75 375.63 2,265
Total 14,150 1,250 10,000 745.32 26,145.32 4,775.71 798 1,255 6,828.71 19,316.61

Date _______________ Date _______________ Date _______________
Sign. ______________ Sign. ______________ Sign. ______________
Journal Entries
Salary Expenses -----------------------26,145.32
Pension Contribution payable -----------------798
Credit Association -------------------------------1,255
.Cash -----------------------------------------------19,316.61
Payroll Tax expenses (14,150*0.08) -------1,132
Credit association payable ------------------1,255
Cash ----------------------------------------------------1,255
Pension payable -----------------------------2,489.69
Cash---------------------------------------------------7,265.40

Earnings Difference Tax rate Progressive Deductive
0-150 --- -- --- ---
151-650 (650 – 150) = 500 10% (50*10%) = 50 15.00
651-1400 (1400 – 650) = 750 15% (750*15%) = 112.50 47.5
1401-2350 (2350 – 1400) = 950 20% (950*20%) = 190 117.50
2351-3550 (3550 – 2350) = 1200 25% (1200*25%) = 300 235.00
3550- 5000 (3550 –5000) = 1450 30% (1450*30) = 435 412.5
>5000 ----- 35% 1750 662.50
How to calculate deductible tax income

1. 150*10% = 15.00
2. 650*15% - 50 = 47.50
3. 1400*20% - 112.50 – 50 = 117.50
4. 2350*25% - 190 – 112.50 – 50 = 235.00
5. 3550*30% - 300 – 190 – 112.50 – 50 = 412.50
6. 5000*35% - 435 – 300 – 190 – 112.50 – 50 = 662.50
New Tax Rate
Earnings Difference Tax rate Progressive Deductive
0-600 --- -- --- ---
600-1650 (1650 – 600) = 1050 10% (1050*10%) = 105 60.00
1650-3200 (3200 – 1650) = 1550 15% (1550*15%) = 232.50 142.50
3201-5250 (5250 – 3200) = 2050 20% (205*20%) = 410 302.50
5251-7800 (7800 – 5250) = 2550 25% (2550*25%) = 637.5 565
7801- 10900 (10900 – 7800) = 3100 30% (3100*30) = 930 955
>10900 ----- 35% 1567.50 1,500
How to calculate deductible

1. 600*10% = 60.00
2. 1650*15% - 105 = 142.50
3. 3200*20% - 232.50 – 105 = 302.50
4. 5250*25% - 410 - 232.50 – 105 = 565
5. 7800*30% - 637.50 - 410 - 232.50 – 105 = 955
6. 5000*35% - 930 - 637.50 - 410 - 232.50 – 105 = 1,500
 Deduction
1. Income Tax = Total Gross Earning Taxable x Tax rate – tax deduct

EVEL FOUR: THEORY
1. Which of the following is not part of the accounting process?
a. Recording c. Financial decision making
b. Identifying d. Communicating
2. Internal users of accounting data include:

a. Economic planners c. Customers
b. Investors d. Company officers
3. The monetary unit assumption:
a. Provides that the unit of measure fluctuates over time
b. Is unimportant in applying the cost principles
c. Is only used for financial statements of banks
d. Requires that only transaction data capable of being expressed in terms of
money be included in the accounting records of the economic entity.
4. A proprietorship is a business:
a. Owned by one person
b. Owned by two or more persons
c. Organized as a separate legal entity under state corporation law
d. Owned by a governmental agency
5. A net loss will result during a time period when:
a. Assets exceed liabilities c. Expenses exceed revenues
b. Assets exceed owner’s equity d. Revenues exceed expenses
6. A company might carry on many activities that do not represent business
transactions such as:
a. Borrowing money from the bank
b. Placing an order for merchandise with a supplier
c. Using office supplies
d. Paying wages
7. Transactions are one type of business events, which may or may not be an
accounting entry is:
a. Payment of monthly rent
b. Sale of pizza and burgers to customers
c. Use of paper, pens, and other office supplies
d. Change of interest rate
8. Garden Beer Grill located around Bole receives a bill of Birr 400 from the Lion
Advertising Agency. The owner, Elias Maru, is postponing payment of the bill until
a later date. The effect on specific items in the basic accounting equation is:
a. A decrease in cash and an increase in accounts payable
b. A decrease in cash and an increase in Elias Maru, Capital
c. An increase in accounts payable and a decrease in Elias Maru, Capital
d. A decrease in accounts payable and an increase in Elias Maru, Capital

9. The Lion Advertising Company is owned by Olana Peter. Alemitu, the inventory
clerk, indicates that Birr 9,750 of supplies were used during the period. The effect
on specific items in the basic accounting equation is:
a. A decreases in supplies and a decreases in Olana Peter, Capital
b. A decrease in cash and an increase in supplies
c. An increase in accounts payable and a decreases in supplies
d. An increase in supplies payable and a decrease in Olana Peter, Capital
10. Almaz Birara, owner of the Habesh Bar and restaurant, withdraws Birr 5,000 in
cash for personal use. The effect on the specific items in the basic accounting
equation is:
a. An increase in accounts receivable and a decrease in Almaz Birara, Capital
b. An increases in salary expense and a decrease in cash
c. An increase in Almaz Birara, Capital and a decrease in cash
d. A decrase in Almaz Birara, Capital and a decrease in cash
11. Abyssinia Coffee Plc purchases Birr 60,000 of coffee from Ethiopian Commodity
Exchange market after availing the required cash in its ECX payee out account. The
effect on the components of the basic accounting equation of Abyssinia Coffee Plc
is:
a. An increase in assets and liabilities
b. A decrease in assets and liabilities
c. No change in total assets
d. An increase in assets and a decrease in liabilities
12. The Mohamed and Baubed Company have the following at September 17: Assets
birr 13,000; Liabilities Birr 8,000; and Owner;s Equity Birr 5,000. On September
18, Mohamed and Baubed Company receive Birr 500 of cash revenue and earn Birr
200 of revenue on credit. Michael Tekle, the only worker that day, works 8 hours
and receives a wage rate of Birr 10 per hour. Michael will not get paid unitl
September 21. No other transactions occur during the day. At the end of September
18 the new totals are:
Assets Liabilities Owner’s
Equity
a. 13,500 7,880 5,620
b. 12,500 8,000 4,500
c. 13,500 8,120 5,380
d. 13,700 8,080 5,620
13. As of December 31, 1996, Mohhamed and Baubed Company has liabilities of Birr
5,000 and owner’s equity of Birr 7,000. It received revenues of Birr 23,000 during
the year ended December 31,1996. What are the assets for Mohammed and Baubed
Company as of Decembwer 31, 1996?
a. Birr 2.000 c. Birr 25,000
b. Birr 12,000 d. Birr 35,000

14. The statement that reports revenues and expenses is the:
a. Statement of owner’s equity
b. Statement of financial position
c. Statement of financial performance
d. Statement of cash flows
15. Dashen bank buys a Birr 1,200,000 VAN on credit. The transaction will affect the:
a. Income statement only
b. Statement of financial position only
c. Income statement and owner’s equity statement only
d. Income statement , owner’s equity statement, and balance sheet
16. The financial statement that summarizes the financial position of a Dashen bank Plc
is the :
a. Income statement
b. Balance sheet
c. Operating statement
d. Owner’s equity statement
17. Which of the following would not appear on the Mohammed and Baubed Company
balance sheet?
a. Accounts receivable
b. Mohamed and Baubed, capital
c. Utilities expense
d. Wages payable
18. Give two examples of adjustments made at the end of the accounting period
a. Depreciation expense and accounts payable
b. Provision for loan losses and accounts receivable
c. Current asset and non-current asset
d. Depreciation expense and provision for loan losses
19. What are the three elements which change equity:
a. Income, investments by owner(s) and distribution to owners(s)
b. Depreciation expense, accumulated depreciation and provision for loan losses
c. Investments by owner(s), long term liability and interest bearing deposits
d. Distribution to owner(s), interest income, current loans and cash
20. How should an accountant convert a previous sale on account to a note receivable?
a. Debit accounts receivable and credit owner’s equity
b. Debit accounts receivable and credit accounts payable
c. Debit notes receivable and credit accounts receivable
d. Debit notes receivable and credit notes payable

21. A company has decided to buy an expensive piece of equipment. The company can
either pay for it in full at the current time or with equal yearly payments over ten
years. Which of the following factors is most important to consider in making the
decision about how to pay for the equipment?
a. Standard cost and compounding rate
b. Amortization cost and annuity value
c. Leasing cost and assets valuation
d. Opportunity cost and interest rate
22. One of the following is an element that helps managers make decisions in a legal
context.
a. Identifying compliance requirements
b. Financial auditing
c. Scheduling and planning
d. Technical requirements
23. The pervasive formula of accounting i.e. A=L+C is mainly shown in one of the
following financial statements
a. Cash flow statement
b. Capital statement
c. Income statement
d. Balance sheet
24. Even though a company is under taking a computerized accounting systems, the
possible accounting cycle which still needs the manual intervention of an accountant
is
a. Classifying
b. Summarizing
c. Identifying and recording
d. Analyzing
25. DEK CO, a VAT registered company purchased construction materials and
delivered services for birr 500,000 and 600,000 respectively including VAT in the
month of June 2005. The amount of VAT and month of payment with no penalty is:
a. VAT payable 13,043.50, during July 2005
b. VAT receivable 13,043.50, during July 2005
c. VAT payable 15,000.50, during July 2005
d. VAT receivable 15,000.50, during June 2005
26. Wakjira Hagos has been paying monthly income tax birr 1,234.85 to the tax office.
His monthly pension contribution that has been deducted from his basic salary is
26.34% of his monthly income tax. Using the current pension proclamation (i.e. 6
and 8), what is Wakjira’s monthly Net Pay? (Assume no overtime and other taxable
allowances).
a. 5,421.00 c. 3,860.89
b. 4,215.89 d. 1,897.35

27. The overstatement of ending inventory in the financial statements results in
a. Overstatement of net income, understatement of CGS, and understatement of
profit tax.
b. Understatement of net income, overstatement of CGS, and understatement of
profit tax.
c. Overstatement of net income, understatement of CGS, and overstatement of profit
tax.
d. Overstatement of net income, overstatement of CGS, and understatement of profit
tax.
28. Abay Merchandising received in advance cash of birr 700,000.00 from its customer
and recorded it as an income. At the end of the fiscal year, birr 95,000.00 is being
earned. The adjusting entry will be:
a. Debit income and credit unearned revenue by birr 95,000.00
b. Credit income and debit unearned revenue by birr 95,000.00
c. Credit income and debit unearned revenue by birr 605,000.00
d. Debit income and credit unearned revenue by birr 605,000.00
29. Jalud merchandising company has receipts of 2% tax withheld by different

legitimate companies at the time of business transaction which add upto birr
49,000.00 at the end of the fiscal year 2005. At the same time, the company
announces profit before tax of birr 220,000.00. Given 30% of business tax rate,
what is the amount of profit tax expected to be paid by the company?
a. 66,000.00 c. 49,000.00
b. 17,000.00 d. 115,000.00
30. Employees at same level pay equal amount of tax. It is principles of tax.
a. Horizontal equity
b. Vertical equity
c. Simplicity
d. Convenience
31. The banker accountant credited the customer account in error and in preparing bank
reconciliation the error could be adjusted by:
a. Adding to depositor balance
b. Deducting to depositor balance
c. Adding to bank balance
d. Deducting to bank balance
32. The process of implementing tasks for small/medium business operation is:
a. Identifying daily work requirements
b. Starting a new designed task
c. Developed effective work habits
d. Evaluate work performance

33. The use of accounting software’s is not:
a. Increase speed
b. Increase source documents
c. Increase accuracy
d. Decrease time of manual processing
34. The sales person of a drug store maintains petty cash of birr 14,000.00. Payment
documents of sales person found to be birr 11,000 utilities, birr 2,000 postage, birr
150 taxi, birr 550 loading and unloading and birr 350 in currencies. Which one is
correct to the sales person.
a. Petty cash can be replenished at birr 13,650.00
b. Petty cash can be replenished at birr 13,500.00
c. A cash overage of birr 150.00
d. A cash shortage of birr 50.00
35. Cash received but not earned is an example of

a. Cash accounting c. Accrued revenue
b. Accruals d. Deferrals
36. Financial institutions should be monitored by:

a. Commercial bank c. Ministry of finance
b. National bank d. Industry minister
37. Breakthrough improvement processes is

a. Review systems for compatibility only
b. Explore opportunities which happened in the past
c. Develop and refine systems for improvement in operations
d. Set parameters of past external improvement
38. Monitor planned work activities is

a. Planning steps that require the comparison of implemented activities with the
planned objectives
b. Plan and schedule activities
c. Setting objectives
d. Implement planned activities
39. Financial budget that helps to finance the project
a. Sales budget
b. Cash forecast budget
c. Production budget
d. Materials usage budget

40. Costs are traced or allocated to the product is
a. Cost accumulation
b. Cost allocation
c. Cost assignment
d. Cost allocation base
41. Inventory cost method used for estimating ending inventory at fire loss:
a. Weighted average method
b. Gross profit method
c. Retail method
d. FIFO
42. The accounting clerk of Zemen Bank record the withdrawal of birr 30,000.00 to by
a customer from saving account as a collection from the customer for settlement of
Mortgage. The entry to correct the recording should be:
a. Debit mortgage receivable and customer account by 30,000.00
b. Credit mortgage receivable and debit the balance of customer account by
60,000.00
c. Debit customers account and credit cash by 30,000.00
d. Debit customers account and credit cash by 60,000.00
43. Which one of the following items represents Deferral?

A. Prepaid insurance C. Wages Payable
B. Fees Earned D. Accumulated Deprecation
44. The Policies Procedures used by management to protect asset for accurate Business
Information and ensure compliance with laws are called
A. System Design C. System Analysis
B. Internals control D. System Implementation
45. A payment of cash for purchase of services should be recorded on:
A. Purchase journal C. Cash Receipt Journal
B. Revenue journal D. Cash Payments
46. When there are a large number of Individual accounts with a common to please them
in separate ledger called
A. Creditor ledger C. Subsidiary ledger
B. Account Payable ledger D. Account Receivable ledger
47. Is sold on account to a customer for Br 1,000 1/10, n/30 the amount of the discount
for early payment would be
A. Br 0 B. Br 10 C. Br 5 D. Br 100
48. Which of the following is a not characteristic of a partnership?

A. Double taxation C. Co-ownership of property
B. Mutual agency D. Limited life

49. the matching principal states that
A. Revenue should be reported when cash is collected
B. Revenue should be reported when service are provided
C. Expense should be reported in the period in which contributed
D. Expense should be reported when they paid in cash
50. A net loss will result during a time period when

A. Asset exceed liabilities
B. Asset exceed owners’ equity
C. Expense exceed revenue
D. Notes receivables & credit accounts receivables
51. Which one the following would not appear on company’s balance sheet
A. Accumulated depreciation C. Owners’ equity
B. Utilities expense D. A Large payable
52. An inventory system that record as all increases &decreases merchandise inventory
account is known as:
A. A perpetual inventory system C. A periodic inventory system
B. FIFO inventory system D. LIFO inventory system
53. Cost of equipment Br 150,000, use full life 5 years, salvage values 10,000. Compute
the annual depreciation using line method
A. 28,000 B. 14,000 C. 10,000 D. 13,000
54. An allowance given to an employee to company safe for inconvenient circumstance

A. Desert allowance C, Hardship allowance
B. Position allowance D, House allowance
55. A process costing system is used by an company that

A. produce heterogeneous product
B. produce items special request of customer
C. Accumulates cost by job
D. produce homogeneous product
56. Business income tax at 30% rate is not paid by
A. Share company/corporation C. Private limited company
B. public enterprise D. Category “C” tax payers
57. If the beginning inventory was Br 120,000 cost of merchandise purchase was Br
180,000 & ending inventory was Br 140,000 How much will be the cost of goods
sold?
A. 160,000 B, 150,000 C, 120,000 D, 180,000

58. Which of the following is not a base for categories o tax payers as categories C?
A. Annual turnover/ Sales C. Natural of operation
B. Legal Personality D. All are basis for categorization of taxpayers
59. the advantages of a partnership as compared to corporation do not include

A. Ease of formation C. Freedom from Gov’t Regulation
B. Unlimited liability D. Ease of decisions
60. in a job order cost system manufacturing overhand applied would be record to
A. Finished goods inventory C. Cost of goods sold
B. Work in process inventory D. Manufacturing over head
61. Which of the following is not an example of intangible asset?

a. Franchise
b. Goodwill
c. Patents
d. Land
62. Goods of 1,000 purchased from Mr. A were recorded in sale book. The rectification
of this error will:
a. Increase in the gross profit
b. Reduce the gross profit
c. Have no effect on gross profit
d. None of the given options
63. Which of the following item must be recorded in the unadjusted cash book of the
depositor in order to bring it in line with the adjusted cash balance?
a. Bank charge
b. An error on the bank statement
c. Uncredited deposit
d. Un presented cheque
64. It is supposed that on 31st December, 2007 the sundry debtors are amounted to birr
40,000 on the basis of past experience, it is estimated that 10% of the sundry debtors
are doubtful. Beginning balance of allowance for doubtful accounts was birr 1,600.
What amount of new provision for doubtful debts will be credited in the allowance
account?
a. Birr 4,599
b. Birr 340
c. Birr 2,400
d. Birr 1,500

65. Which of the following is an example of operating expense?
a. Purchasing operation equipment
b. Purchasing a vehicle
c. Purchasing cleaning services
d. Buying a computer
66. The balance sheet reported a beginning balance of birr 20,000 in accounts
receivable and an ending balance of birr 15,000 credit sales of birr 20,000 were
made during the year. Using this information, compute cash collected from
customers:
a. Birr 205,000
b. Birr 195,000
c. Birr 200,000
d. Birr 15,000
67. What is a business called that sells goods that it purchases for resale?
a. Service business
b. Manufacturing business
c. Partnership business
d. Merchandising business
68. What is the primary purpose of a sales journal?
a. Makes work for the account
b. Shows the company the purchase made last month
c. Shows the individual accounts of all customers
d. Saves time in posting and it
69. Which of the following entry will be recorded if cheque deposited is dishonored by
bank
a. Bank account (Dr) and debtors account (Cr)
b. Debtors account (Dr) and bank account (Cr)
c. Creditors account (Dr) and bank account (Cr)
d. Creditors account (Dr) and bank account (Cr)
70. Which of the following is not a financial statement?
a. Audit report
b. Balance sheet
c. Income statement
d. Cash flow statement
71. Which of the following accounting will be credited in the books of XYZ Company
if the business purchased a vehicle through cheque?
a. Vehicle account
b. Business account
c. Debtors account
d. Bank account

72. Documentary evidence in a specific format used to record the data details of
transaction is known as:
a. Account
b. Voucher
c. Journal
d. Ledger
73. Which of the following account balance account will be shown on debit of trial
balance (it is assumed that all account balance are shown on normal balance?
a. Capital account
b. Sundry account
c. Accounts payable account
d. Cash account
74. The amount of salary pay to Mr Sahili should be debited to:

a. Mr Sahili account
b. Cash account
c. Expense account
d. Drawing account
75. Which of the following is correct about the flow of recording a transaction?
a. Accuracy of event  voucher  journal ledger  trial balance  profit and
loss statement  balance sheet.
b. Accuracy of event  journal  voucher ledger  trial balance  profit and
c. Accuracy of event  ledger  voucher  journal  trial balance  profit and
d. Accuracy of event  trial balance  voucher  journal  ledger  profit and
76. This account does not appear on the income statement
a. Accumulated depreciation
b. Depreciation expense
c. Sales expense
d. Marketing expense
e. Interest expense
77. Providing services on account for Birr 40,000 would?

a. Increase cash Birr 40,000 and decrease account receivable Birr 40,000
b. Decrease account receivable Birr 40,000 and decrease owner’s equity Birr 40,000
c. Increase account receivable Birr 40,000 and increase owner’s equity Birr 40,000
d. Increase account receivable Birr 40,000 and decrease owner’s equity Birr 40,000.

78. Which of the following transaction require a compound journal entry?
a. An owner invested personal cash on his or her business.
b. Purchase of Birr 100 of supplies same cash and the rest on account.
c. Purchase three kinds of supplies for cash
d. Received cash from customers as payment for service
79. One of the following loans is an expense of adjusting entry for deferred items?
a. Expense to asset
b. Revenue to liability
c. Asset to expense
d. Liability to expense
80. From income statement sales revenue is Birr 650,000 the gross margin is 20%, what
is the cost of goods sold?
a. Birr 650,000
b. Birr 260,000
c. Birr 130,000
d. Birr 520,000
81. Industry and legislative requirements may not cover:

a) Industry code of practice
b) Illegitimate disbursement
c) Accounting standards
d) Relevant financing laws
82. Directly shown in the income statement is:
a) direct cost
b) direct labor cost
c) selling expenses
d) factory over heed cost
83. Deducted from the balance according to the depositors balance:
a) deposit in transit
b) non-sufficient fund
c) outstanding checks
d) notes collected by the banks
84. How should an accountant convert a previous sale on account to a note receivable?
a) debit account receivable & credit account payable
b) debit notes receivable & credit notes payable
c) debit notes receivable &credit account receivable
d) debit account receivable & credit owners equity

85. The statement that reports revenues and expenses is the:
a) statement of owners’ equity
b) statement of cash flows
c) statement of financial performance
d) statement of financial position
86. ABC Inc. sold a piece of equipment for birr 50,000. The equipment originally cost
birr 100,000 & the accumulated depreciation on the equipment amounted to
birr 60,000. The company should recognize:
a) Again of birr 50,000
b) Again of birr 10,000
c) Again of birr 60,000
d) No gain or loss
87. Internal users of accounting data including:

a) Investors
b) Customers
c) Economic planners
d) Company officers
88. Which of the following is not part of the accounting process?

a) financial decision making
b) identifying
c) recording
d) communicating
89. An account does not closed to income summary account at the end of period:
a) salary expense
b) supplies expense
c) liability
d) revenue
90. What are the three elements which change equity?
a) distribution to owner (s) interest income, current loans & cash
b) income, investments by owners (s) and distribution to owners (s)
c) investments by owners (s) long term liability and interest bearing
deposits
d) depreciation expense, accumulated depreciation & provision for loan
losses
91. Dashen bank buys a birr 1,200,000 Van on credit the transaction will affect the:
a) income statement only
b) statement of financial position only
c) income statement & owner’s equity statement only
d) income statement, owner’s equity statement & balance sheet

92. The receipt of cash from customers in payment of their accounts would be recorded
by:
a) A debit to account payable and a credit to cash
b) A debit to cash & a credit to account payable
c) A debit to cash & a credit to account receivable
d) A debit to account receivable & a credit to cash
93. Almaz Birara owner of the Habesha Bar & Restaurant withdraws birr 5,000 on cash
for personal use. The effect on the specific items in the basic accounting equation
is:
a) An increases in account receivable & a decrease in Almaz Birara
capital
b) An increase in salary expense and a decrease in cash
c) A decrease in Almaz Birara capital and a decrease in cash
d) An increase in Almaz Birara capital & a decrease in cash
94. The Mohamed & Baunbed company has the following at September 17: Assets
birr 13,000; liabilities birr 8,000 and owner equity birr 5,000. On September 18,
Mohamed & Baunbed company receives birr 500 of cash revenue and earns birr 200
of revenue on credit. Michael Tekle, the only workers that day works 8 hours &
receives a wages rate of birr 10 per hour. Micheal will not get paid until
September 21. No other transaction occur during the day. At the end of
September 18, the new totals are:
a) Assets, liabilities, owners’ equity birr 13700 birr 8080 birr 5620
b) Assets, liabilities, owners’ equity birr 13500 birr 8120 birr 5380
c) Assets, liabilities, owners’ equity birr 12500 birr 8000 birr 4500
d) Assets, liabilities, owners’ equity birr 13500 birr 7880 birr 5620
95. The monetary unit assumption:
a) is only used for financial statement of banks
b) is unimportant in applying the cost principle
c) Provides that the unit of measure fluctuates over time
d) Require that only transaction data capable of being expressed in terms
of money be included in the accounting records of the economic entity
96. One of the following provides objective evidence for the occurrence of a
transaction
a. Account
b. Journal
c. Source document
d. Work sheet
97. The process of transferring debit and credit entries to the ledger accounts
a. Adjusting
b. Correcting
c. Journalizing
d. Posting

98. An account that is nominal or temporary
a. Chala’s drawings
b. Paid in capital in excess of par value
c. Retained earning
d. Unearned rent income
99. The meaning of the credit term 2/10, n/30 for sale of merchandise inventory is:
a. An invoice to be paid within 10 days or at the end of 30 days
b. An invoice paid within 10 days the accountant considers a 2% discount
c. An invoice may be paid Net of 2 % discount by the end of month of
sale
d. An invoice is subjected to discount regardless of date of payment
100. One of the following is a supporting statement for merchandising enterprise

a. Balance sheet
b. Income statement
c. Retained earnings statement
d. Schedule of accounts receivable and account payable
101. Generally accepted accounting principles call for recognition of expense when
a. Incurred and collected in cash
b. Incurred regardless of time of the related cash payment
c. Goods and services are purchased
d. Paid in cash regardless of the time expenses are incurred
102. Financial statements prepared in between the fiscal period is known as
a. Annual financial statements
b. Fiscal-year financial statements
c. Interim financial statements
d. Year-end financial statements
103. One of the following financial statements is prepared on a specific date of a

business entity
a. Balance sheet
b. Capital statements
c. Retained earnings
d. Statement of profit and loss
104. An inventory system that continuously discloses the cost of inventory on hand
and cost of inventory sold is:
a. First-in first-out inventory costing system
b. Periodic inventory system
c. Perpetual inventory system
d. Physical inventory system

105. A depreciation method acceptable by the Ethiopian income tax law for
business organization
a. Double declining balance
b. Straight line
c. Sum-of-the-years’ digits
d. Unit of production
106. If original cost salvage value and accumulated depreciation balance of office
equipment after adjustment are birr 20,000 birr 4,000 and birr 12,000 respectively
the book value of the office equipment is :
a. Birr 10,000
b. Birr 8,000
c. Birr 7,000
d. Birr 5,000
The following information is taken from the accounting records of almaz company
immediately before accounts of the company are adjusted
Accounts receivable birr 40,000
Allowance for uncollectible accounts (credit) 200
Percentage of uncollectible 3%
107. Which of the following statement s is correct , if uncollectable is estimated
based on year end accounts receivable balance
A. Account receivable is birr 38,800 after adjustment
B. Allowance for uncollectible accounts is birr 1000 after adjustment
C. Net realizable value of account receivable is birr 38,800 after adjustment
D. Uncollectible accounts expense is birr 1,400
108. The balance of allowance for uncollectible accounts after adjustment is :
a. Br. 200
b. Br. 1,200
c. Br. 1,400
d. Br. 38,800
109. Temporary (or casual ) employees salary are NOT affected by
a. Income tax deductions
b. Overtime earnings
c. Pension contribution deduction
d. Voluntary deduction
110. One of the following is NOT a benefit of applying computer based accounting
system
A. Enhance accuracy in recording transaction
B. Increase the need for source documents
C. Minimizes errors in recording and reporting transactions
D. Saves time for posting entries

111. Profit and loss of partnership business is allocated to partners
a. According to their respective capital balances
b. According to the time they spend in the business
c. At agreed rates states on the articles of partnerships
d. Equally
112. One of the following is NOT the rights of common stockholders

a. Share equally in any assets remaining at the end of liquidation
b. The basic owner of corporate assets
c. The right to share in company profit
d. Voting right on company affairs
113. What is the breakeven sales quantity if total fixed cost is birr 10,000 while the units
selling price and variable costs are birr 15 and birr 10 respectively?
a. 667 units
b. 1,000 units
c. 2,000 units
d. 10,000 units
114. According to the Ethiopian employment income tax rules and regulations the
following items are NOT exempted from income tax
a. Contribution to retirement fund plan not exceeding 15 % basic salary
b. Over time earnings
c. Reimbursement for medical costs incurred
d. Transaction allowance not exceeding birr 800
115. A type of proprietary fund use to account for the operation of a government
unit in a manner similar to business organization is.
a. Enterprise fund
b. Expenditure trust fund
c. International service fund
d. Non expenditure trust fund
116. If beginning inventory was birr 120,000, cost of merchandise was birr
180,000, and ending inventory was birr 140,000, how much will be cost of goods
sold?
a. 160,000 c. 120,000
b. 150,000 d. 180,000
117. Which of the following is not a base fro categorization of tax payers as
category ‘C’?
a. Annual turnover/Sales
b. Legal personality
c. Nature of operations
d. All

118. The advantages of a partnership as compared to corporation do not include:
a. Ease of formation
b. Unlimited liability
c. Freedom from government regulation
d. Ease of decision making
119. In a job order cost system, manufacturing overhead applied would be record
to:
a. Finished goods inventory
b. Work in process inventory
c. Cost of goods sold
d. Manufacturing overhead
120. Cost of equipment birr 150,000 uses full life 5 years salvage value 10,000
annual depreciation using straight line method
a. 28,000 B. 14,000 C. 10,000 D. 13,000
121. Peachtree accounting applicable to / computerizing accounting more
a. Company b. Government officer c. micro finance d. banks
122. According to Ethiopian tax proclamation which one is not obligation of an
employee
a. OT earnings b. EIT c. Charity contribution d. pension contribution
123. Not internal users
a. Employee b. financial institution c. budget d. manager
124. The budgeting phases and function includes
a. Planning b. controlling c. evaluating d. all
125. An example of an accelerated depreciation method is
a. Straight line b. sum of the years digit c. unit production d. none
126. According to the Ethiopian tax proclamation which is not obligation of an
employees
a. OT earning b. BIT c. charity contribution d pension contribution

Matching 1
A B
1. Quality I A. Policies and procedures in place
2. Recorded as an asset or as an B. Used to upload data
expense R C. Segregation of duties
3. Conversion costs T D. Budget
4. Internal control A E. For External users and GAAP based
5. Account payables and accounts F. Gap between existing and required skill
receivable S G. Date of actual events for accounting
6. Work schedules L H. More Risks and cost supposed by the supplier
7. Accrued revenue W I. Performance evaluation
8. Spreadsheet B J. Prime costs
9. Training need assessment F K. Increases with units produced
10. Financial accounting E L. Activities assigned to workforce and machines with
11. FOB destination P its completion time
12. Real time transaction G M. Prior claim of creditors
N. FOB shipping
13. Financial plan D O. Decreases with units produced
14. Fixed cost per unit O P. Meeting or exceeding customers’ needs
15. Compliance audit V Q. Retirement payments
R. Prepayments
S. Balance sheet accounts used in accruals
T. Direct labour and overhead costs
U. Residual claim of share holders
V. Disclaimer audit opinion
W. Rent/interest receivables
Matching 2
Column A Column B
1. Excise Tax h a. Appropriations
2. Unqualified audit opinion e b. Bank service charge
3. Government Fund c c. Capital project fund
4. Acquisition of goods and services by a d. Direct labour and overhead costs
governmental fund entity a e. Financial statements presented fairly
5. Organization cost i f. Group A tax payers
6. Submit income statement and balance sheet to g. Group B tax payers
tax authority f h. Indirect tax
7. Cumulative preferred shareholders r i. Intangible asset
8. Home office and branch office p j. Internal control system
9. Bank debit memo b k. Job order costing
10. Production of voluminous similar products m l. NSF Fund
11. Segregation of duty j m. Process costing
12. Source of finance for the state q n. Product pricing decision
13. Management accounting n o. Purchase order report
14. Quantity ordered, received, and remaining k p. Reciprocal accounts
15. Conversion manufacturing costs d q. Tax, loan, and donation
r. The right to take dividend in arrears

Matching 3
Column A Column B
1. The gross increases in owner’s equity resulting from a. Transactions
business activities c b. Accounting
2. Requires that only transaction data capable of being c. Revenues
expressed in terms of money be included in the d. Assets
accounting records of the economic entity. k e. Statement of financial
3. Summarizes the changes in owner’s equity for a positions
specific period of time. j f. IFRS(International Financial
4. Reports the assets, liabilities, and owner’s equity of a reporting Standard)
business enterprise at a specific date. e g. Expenses
5. States that economic event can be identified with a h. Liabilities
particular unit of accountability. l i. Owner’s equity
6. Statement of Financial Performance o j. Owner’s equity statement
7. States that economic event can be identified with a k. Monetary unit assumption
particular unit of accountability.l l. Economic entity assumption
8. Resources owned by the business. d m. Ownership claim on total
9. The process of identifying, recording, and assets
communicating the economic information of an n. Cost principle
organization to interested users.b o. Presents the revenues and
10. Economic events of the enterprise recorded by expenses and net income of
accountants. m company for specific period of
11. Costs of assets consumed or services used in the time
process of earning revenue g p. Return on investment
12. Creditor ship claims on total assets h q. Financial statement
13. A common set of rules, procedures, and guidelines r. Balance
(standards) used by accountants in reporting s.
economic events. f
14. Business events, which may or may not necessitate an
accounting entry.a
15. States those assets should be recorded at their cost. n

Matching 4
Column A Column B
1. Increases in owner’s equity m a. Partnership agreement
2. Decreases in owner’s equity l b. Input VAT
c. Economic entity assumptions
3. Separating financial information in put periodic d. Budget officer
4. Indicated that personal and business record keeping e e. Periodicity assumption
should be separately maintained c f. Partnership
5. External users of accounting information h g. Unlimited liability
6. Internal users of accounting information d h. Suppliers
7. Original cost minus salvage value n i. Sole proprietor ship
8. Original cost minus accumulation depreciation k j. Sustaining
9. Disadvantage of partnership g k. Book value
10. Articles of partnership a l. Expense
11. Maintained & reviewing standards j m. Revenue
12. Business owned by two or more persons f n. Deprecation Cost
13. Business owned by one person i o. Market Value
14. VAT paid on purchase of goods & service b p. . Limited Liability
15. VAT collected from sales of goods & services q q. Q. Output VAT
Matching 5
Column A Column B
1. Expense paid in advance for futures n a. accrued expense
2. Profit distributed to owners of corporation c b. Retained earnings
3. Summarize the changes in owners ‘equity for c. Dividend
specific period of time b d. Capital
e. Expense
4. Requires that only transaction data capable of being f. Accrued Revenue
expressed interims of money be included in the g. Economic Entity assumption
account records of the economic entities l h. Statement Financial Position
5. Cost of assets consumed or used in the process of i. Journalize
earning revenues e j. Posting
6. The process of recording transaction in the book of k. Patent
original entry i l. Monetary Unit Assumptions
7. Intangible asset k m. Land
8. Direct tax p n. Deferred Expenses
9. Prime cost r o. VAT
10. Revenue earned but not yet collected and recorded f p. Income tax
11. Depreciation t q. Deferred Revenue
12. Interest v r. Direct material & direct labour
13. Asset & liability of the business should be recorded s. Direct labor &MOH costs
costs separately from the personal asset & liability of t. Fixed asset
the owners g u. Merchandise Inventory
14. Entries required after end of the accounting period v. Cost of capital
to update the balance sum accounts w w. Adjusting
15. Items held to be sold to customers u x. Closing

Matching 6
Column A Column B
1. Advantages of direct tax g a. Cash flow statement
2. Equality of debit and credit k b. Ledger
3. Each record in a journal m c. Deposit in transit
4. Added bank balance c d. Sales tax
5. Summary of cash receipt and payments a e. Journal
6. Normal balance for asset account f f. Debit
7. Book of secondary entry b g. Equitable
8. List of account in the ledger l h. Special Journal
9. For relatively small amount of expense o i. Uncertainty
10. Book of original entry e j. Property Tax
11. Indirect tax d k. Trial balance
12. End of accounting process n l. Chart of Accounts
13. Direct tax j m. Entry
14. Disadvantages of indirect tax i n. Post-closing trial balance
15. Record only one type of transaction h o. Petty cash
p. Income statement
q. Outstanding checks
Matching 7
Column A Column B
1. Statement of Financial Performance. O A. Transaction
2. Reports the assets, liabilities, and B. Accounting
owner’s equity of a business enterprise C. Revenues
at a specific date. E D. Assets
3. Business events, which may or may not E. Statement of financial position
necessitate an accounting entity. L F. IFRS(International Financial
4. The gross increases in owner’s equity Reporting Standards)
resulting from business activities G. Expense
entered into for the purpose of earning H. Liabilities
income. C I. Owners’ equity
J. Owners’ equity statement
K. Monetary unit assumption
L. Economic entity assumption
M. Ownership claim on total asset
N. Cost principle
O. Presents revenues & expense and net
income of a Company for specific
period of time
P. Return on Investment
Q. Financial statement
R. Balance

Matching 8
Column A Column B
1. Safety proceduresE A. Management accounting
2. Demerit of indirect tax C B. Prime cost
3. Provides financial and non-financial C. Creation of inflation
information D D. Entry
E. Respect from hazards
F. Using active listening
G. Sales budget
H. Product costs
I. Variable costs
J. Excise tax
K. Questionnaires
L. Notes receivable
M. Financial accounting
N. Fixed costs
O. Expense
P. Indirect tax
Q. Balance sheet
R. Accuracy
S. Quality statistics
Matching 9
Column A Column B
1. Entries required at the end of the a. Accrued Expenses
account period e b. Retained earning
2. Ledger l c. Dividend
3. WIP inventory h d. Capital statement
e. Expenses
f. Accrued revenue
g. Economic entity assumption
h. Statement of financial position
i. Journalizing
j. Posting
k. Patent
l. Monetary unit assumption
m. Land
n. Deferred expenses
o. VAT
p. Income tax
q. Deferred revenue

r. Direct material & direct labour
cost
s. direct labour & manufacturing
overhead
t. Fixed assets
u. Merchandise Inventory
v. Cost of capital
w. Adjusting
x. Closing
Matching 10
Column A Column B
1. Drawing accountV A. Accrued Expenses
2. Internal control system G B. Retained earning
3. Regressive taxation O C. Dividend
4. Progressive taxation P D. Capital statement
5. Checking accounts H E. Expenses
6. Tax impose on luxury goods R
F. Accrued revenue
G. Economic entity assumption
H. Statement of financial position
I. Journalizing
J. Posting
K. Patent
L. Monetary unit assumption
M. Land
N. Deferred expenses
O. VAT
P. Income tax
Q. Deferred revenue
R. Direct material & direct labour
cost
S. direct labour & manufacturing
overhead
T. Fixed assets
U. Merchandise Inventory
V. Cost of capital
W. Adjusting
X. Closing

Accounting Project Level IV

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TEWODROS BEKELE KEBEDE

Organized by Chala U. (MA) in Accounting 1|Page

Organized by Chala U. (MA) in Accounting 2|Page

2. 𝐈𝐧𝐜𝐨𝐦𝐞 𝐓𝐚𝐱 = 𝑇𝑜𝑡𝑎𝑙 𝐺𝑟𝑜𝑠𝑠 𝐸𝑎𝑟𝑛𝑖𝑛𝑔 𝑡𝑎𝑥𝑎𝑏𝑙𝑒 𝑥 𝑡𝑎𝑥 𝑟𝑎𝑡𝑒

1. Turu Tedla = 11,200*35% - 662.50 = 3,257.50

3. Pension Contribution = Basic salary*employee PC rate

1. Turu Tedla = 10,000*7% = 700

4. Other deduction for Ethiopian renaissance dam = BS * 10%

1. Turu Tedla = 10,000*10% = 1,000

5. Total deduction = IT + PC + Other deduction

1. Turu Tedla = 3,257.50 + 700 + 1,000 = 5,057.50

1. Turu Tedla = 12,000 – 4,957.50 = 7,042.50

Organized by Chala U. (MA) in Accounting 3|Page

Organized by Chala U. (MA) in Accounting 4|Page

Organized by Chala U. (MA) in Accounting 5|Page

Insurance exp. Supplies exp.

Qeerroo Hotel Companies

Organized by Chala U. (MA) in Accounting 6|Page

Qeerroo Hotel Companies

Qeerroo Hotel Companies

Total Liabilities + Shareholders’ Equity ---------60,669.50

Organized by Chala U. (MA) in Accounting 7|Page

Deposit tickets collected from bank Check Register

Bank statement for April

Organized by Chala U. (MA) in Accounting 8|Page

Organized by Chala U. (MA) in Accounting 9|Page

Area 1 January February March Total

Area 2 January February March Total

Organized by Chala U. (MA) in Accounting 10 | P a g e

Production budget in units A= 10,000 + 20,000 - 21,000 = 9,000

Organized by Chala U. (MA) in Accounting 11 | P a g e

Area 1 Activities Materials for B Total

Area 2 Activities Materials for A Total

Area 2 Activities Materials for B Total

Total Material to be purchased Sand = 180,000 +54,000 = 234,000

Organized by Chala U. (MA) in Accounting 12 | P a g e

(B) accrued payroll (for labour cost)

Organized by Chala U. (MA) in Accounting 13 | P a g e

2. Calculate the cost of each job

March 15 received cash from sales of furniture birr 250,000

1. Record the above entries in a journal entry form

Organized by Chala U. (MA) in Accounting 14 | P a g e

Cash A/Receivable VAT /Rec. AFDA VAT/Payable

Sales Purchase Ent. Exp Salary Exp. Utility Exp.

Supply Exp. AFDA Exp.

Organized by Chala U. (MA) in Accounting 15 | P a g e

Output VAT (sales) = 330,000*15% = 49,500

Organized by Chala U. (MA) in Accounting 16 | P a g e

October 1. Inventory ------------------------ 15 units@30

Organized by Chala U. (MA) in Accounting 17 | P a g e

Perpetual Inventory system LIFO costing Method

Date Purchase CGS ( sales Inventory

Cost of goods sold = 175 + 320 + 60 +90 = 645

Organized by Chala U. (MA) in Accounting 18 | P a g e

S.No Employee Name Basic salary Overtime worked Allowance

01 Roza Yohannes 7,500 1500 Position

S. Full Earning Gross Deductions Total NP Sig

Prepared by _____ checked by _ approved by _______

Prepared by _____ checked by _ approved by _______