Practical report

HAWASSA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

A Report submitted in partial fulfillment of the requirement for

the subject INTERNSHIP on Bachelor of Arts (BA) Degree in
Accounting and Finance
Prepared by : BETRE MAREYAM DEJENE
ID NO :
SoScR/0452/12
ADVISOR : Mr. TEKALIGN

HAWASSA, ETHIOPIA
DECEMBER 2015
 Practical report

ABSTRACT
Generally, the objective of this practical attachment is to assess the performance of commercial
bank of Ethiopia Gummer branch. The extent to which commercial Bank of Ethiopia Gummer
branch is realizing its vision and mission and performance of the organization in relation to its
objectives. The intention of this practical attachment was to increase student’s knowledge and
enable student to compare what have learnt so far in class and what have experienced in summer
practical. To produce well qualified, self-reliant, active, change agent and real problem solver
student. In addition, the other objective is to investigate equal participation of commercial Bank
of Ethiopia with other bank to it realizes to its visions, mission and objective. Not only limited to
this but also emphasis the problems faced by me while I was performing this practical attach-
ment. Thus, practical attachment suggests solutions and some of policy implication toward re-
ducing the problems based on finding.
 Practical report

Acknowledgement
First of all my deepest thanks goes to the Almighty God for his endless help and make me to
stay in life to this day and enables me to complete my internship. I also would like to express
my deepest gratitude to Demms Abza (customer service manager) for his enthusiastic support
from the preparation until the final discussion of this internship with frequent follow up my ac-
tivities and guide me. And also I am greatly thanks for all employee of Gummer branch they had
been assisted how to do well in bank and they were helped to adapt the environment of bank eas-
ily. Finally I would like to acknowledge all individual and institutions that have helped me mate-
rially and morally during the preparation of this paper.
 Practical report

Contents
ABSTRACT................................................................................................................................................2
Acknowledgement.......................................................................................................................................3
Chapter One.................................................................................................................................................1
Introduction.................................................................................................................................................1
1.1 Back ground of Commercial Bank Of Ethiopia.................................................................................1
1.2 Company /Organization Mission/Values/Vision/Objective...............................................................2
1.2.1 Mission.......................................................................................................................................2
1.2.2 Values.........................................................................................................................................2
1.2.3 Vision and Objectives of CBE....................................................................................................5
1.3 Philosophy/corporate Culture............................................................................................................2
1.4 Organizational Structures..................................................................................................................4
1.5 Products and services /Clients...........................................................................................................4
1.6 Program or project of the organization..............................................................................................8
1.6.1 Career and Succession Planning Management: -............................................................................8
CHAPTER TWO.........................................................................................................................................9
MANAGEMENT AND TRAINING INFORMATION..............................................................................9
2.1 Orientation of the branch manager given for me...............................................................................9
Chapter Three............................................................................................................................................10
Job background and Information...............................................................................................................10
3.1 Background of the department/division where you working...........................................................10
3.2 Objectives and major responsibilities as well as activities of the department or division................11
3.2.1 Objective of the Department.....................................................................................................11
3.2.2 Responsibilities as well as activities of the department/division...............................................11
3.3 The responsibilities and major activities me as a member of department........................................12
3.4 Performance Evaluation of my activities.........................................................................................12
CHAPTER FOUR.....................................................................................................................................13
EVALUATING ACCOUNTING CONCEPTS IN PRACTICE................................................................13
 Practical report

4.1 INTRODUCTION...........................................................................................................................13
4.2 The concepts of fundamental of accounting....................................................................................13
4.3 In the concepts of financial accounting..............................................................................................5
4.3 In the concepts of financial management.........................................................................................12
4.4 Other related concepts.....................................................................................................................13
Chapter Five..............................................................................................................................................13
SWOT Analysis.........................................................................................................................................13
5.1 Introduction.....................................................................................................................................13
5.2 Strength, Weakness, Opportunity and Treat (SWOT) Analysis of the CBE....................................14
Chapter six................................................................................................................................................17
Evaluation, Conclusion and Recommendation..........................................................................................17
6.1 Challenges and Problems encountered on the job and remedial measures...................................17
6.2 Problem of division or department and suggested solutions........................................................18
6.3 Significance of Practical Attachment..........................................................................................19
6.4 Relevance of Practical Attachment to my studies......................................................................20
6.6 Summery, Conclusion and Recommendation..............................................................................20
6.6.1 Summary of the Attachment................................................................................................20
6.6.2 Conclusion..............................................................................................................................21
6.6.3 Recommendation..................................................................................................................21
Reference...............................................................................................................................................22
 Practical report

Chapter One

Introduction

1.1 Back ground of Commercial Bank Of Ethiopia

Commercial Bank of Ethiopia was established in 1942 and it was legally established as a share
company in 1963. In 1974, CBE merged with the privately owned Addis Ababa Bank. Since then
it has playing significant roles in the development of the country.

It has more than 1,824 branches stretched across the country and has opened four branches in
South Sudan. Currently CBE has more than 35 million account holders and the number of mobile
banking and CBE birr user reached more than 5.9 million and 5.4 million respectively. Similarly
the number of card holders has reached 2.8 million as of July 2022.

It has pioneer to introduce modern banking to the country and the first bank to introduce Auto-
matic Teller Machine (ATM) services for local users.

CBE also is pioneer to introduce Western Union Money Transfer services early 1990’s and cur-
rently working with other 20 money transfer agents like Xpress Money, Money Gram De-
habishil, etc. The bank has strong relationship with 50 renowned foreign banks and has a SWIFT
bilateral arrangement with more than 700 other banks across the world.

Currently CBE has merged with construction and Business bank and increased its market size
and capital.

Gummer branch is one of the new branch of commercial bank of Ethiopia. It has been estab-
lished in 2015. It is located in Guraghe zone,Arekit town in SNNP. Commercial bank of Ethiopia
Gummer branch started working within few employees but, currently there are 15 employees as
August of 2022 and over 10,000 customers

1
 Practical report

1.2 Company /Organization Mission/Values/Vision/Objective

1.2.1 Mission
The bank highly committed to best realize stakeholders values through enhanced financial inter-
mediation globally owned and supporting national development priorities, by developing highly
motivated, skilled and disciplined employees as well as state of the art technology. We strongly
believe that winning public confidence is the basis of our success.

1.2.2 Values
The following are values of the bank

1. Integrity

 We are committed to the highest ideals of honor and integrity.

 We are committed to act in an honest and trustworthy manner.

 We are committed to firmly adhere to ethical principles and standards.

2. Service Excellence

 We are committed to be preferred brand in service quality, the minds of customers and
general public.

 We strive to build long lasting relationship with our customers.

 We are committed to promote efficient and effective services and ensure maximum value
for money

3. Professionalism

 We take ownership and personal responsibilities for all what we do.

 We are professional in conduct and treat customers with utmost respect.

 We are responsive to the needs and interest of our customers.

 We maintain confidentiality and privacy of all customers information.

2
 Practical report

 We continually develop ourselves to maintain leading-edge capabilities.

 We apply our knowledge and competence to our competitive advantage

4. Learning Organization

 We anticipate and respond to internal and external changes through constant improve-
ment and adjustment.

 We establish a culture that nurtures individual and group learning.

 We retain and disseminate tacit knowledge across the bank.

5. Empowerment

 We distinguish employees as valuable organizational resources.

 We promote decentralization and delegation of duties and responsibilities .

 We maintain an atmosphere that inspire confidence and take ownership.

 We encourage employee to take responsibilities and support each other and customer in a
courteous and respectful manner.

 We recognize our employees for their best achievements.

 We apply our knowledge and competence to our competitive advantage

6. Teamwork

 We respect one another and cooperate in our work.

 We recognize the importance of teamwork for our success.

 We collaborate and support to one another to ensure process integration and minimize ex-
ternal business challenges.

7. Respect for Diversity

3
 Practical report

 We are sensitive to cultural, ethnical and religious or other values of employee and cus-
tomers.

 We value diversity of ideas and viewpoints of our employees.

 We foster an environments of inclusiveness, where all people regardless of sex, age, be-
liefs etc. can exercise their maximum potential.

 We are committed to address the needs of our customer, regardless of their sex, age, edu-
cation and etc.

 We are committed to listen one another and respond appropriately.

8. Corporate Citizenship

 We value the importance of our role in national development endeavor and stand up for
this commitment.

 We abide by the laws of Ethiopia and other countries in which we do business.

 We care about society’s welfare and the environment.

 We believe that the sustainability of our business depends on our ability to maintain and
build public confidence.

9 Customer Satisfaction

 we strive to excel our business and satisfy our customers

 we are committed to offer the highest quality service to our customers and aspire to be
branded with quality in the minds of our customers and the general public

10. Employ satisfaction

 we are committed to employee training and professional growth

 we distinguish our employees as valuable organizational resources

4
 Practical report

 we recognize our employees for their achievements Learning organization

11. Learning organization

 we are committed to anticipate and respond to internal and external changes through con-
stant improvement and adaptation

 we strive to establish a culture that nurtures individual and group learning

12. Public trust

 we understand that the sustainability of our business depends on our ability to maintain
and buildup public confidence

13. Value for money

 we use resources carefully to save expense, time or effort

 we deliver the same level of service for less cost, time or effort

 we deliver a better service or getting a better return for the same amount of expense, time
or effort

14. Decentralization

 we are committed to delegate operations and decision-making responsibilities

1.2.3 Vision and Objectives of CBE

 The vision of the bank is to become a World-Class Bank by the year 2025.

Objectives of CBE are:-

 To contribute to the general economic development efforts of nation

 Enhance growing market share

 Expanding the bank’s capital base

 Ensuring excellence in customer services

5
 Practical report

 Provide differentiated, varied and value added banking services ,

 Maximizing profitability through increased efficiency

 Increasing employee satisfaction and developing their skill

1.3 Philosophy/corporate Culture

The Bank strives to develop a working culture of treating every customer as “a king”- a culture
that helps to create effective and efficient services, honesty, transparency and accountability

1.4 Organizational Structures

An organizational structure is a system that outlines how certain activities are directed in order
to achieve the goals of an organization. These activities can include rules, roles, and responsibili-
ties. The organizational structure also determines how information flows between levels within
the company. For example, in a centralized structure, decisions flow from the top down, while in
a decentralized structure, decision-making power is distributed among various levels of the orga-
nization. Having an organizational structure in place allows companies to remain efficient and
focused.

Figure 1.1 Organizational Structure Flow

6
 Practical report

All departments in this organization are related to each other. The other department can control
the activity of other. Also on their daily activities they must report to the body which controls
each department. Also they control each other to minimize the problem on job, to be fair and ac-
ceptable by every department. To achieve the objective and vision they obey responsibility for
the job given to all departments.

1.5 Products and services /Clients

Commercial Bank of Ethiopia has a range of options. You can go with Ordinary saving, Youth,
Teen, Education saving account, and a specific saving account for Women. Choose the type of
account that suits you the best.

Major Products and Services

1. Deposit Products and Services
The Bank provides different deposit products and services that enable customers to save money
and store valuable property.
o Savings Account
This is an interest-bearing deposit account. CBE offers different types of Savings
Accounts designed to address needs of different sections of the society.

Demand Deposit Account

It is a non-interest-bearing account which is operated by cheque.

o Fixed Time Deposit

This deposit account allows customers to deposit their money for agreed term without movement
and receive a higher interest rate than the prevailing interest rate for savings. The minimum
initial deposit is birr 10,000 or USD 5,000 or its equivalent in EUR or GBP.

o Foreign Currency Account

This account is opened in USD, GBP or EUR by international organizations, foreigners, NGOs,
embassies etc whose source of fund is overseas and in foreign currencies.

7
 Practical report

o Diaspora Account

This account is designed for Ethiopians and foreigners of Ethiopian origin living

abroad and companies owned by them to deposit money in USD, GBP or EUR.

o Safe Deposit Box

CBE gives rental service of safe deposit boxes for customers to store their valuable property.

2. Credit Products and Services

CBE provides credit for working capital and expansion and facilitation of local and international
trading activities. It also provides short, medium and long term loans.

Consumer Loans

A consumer loan is given to consumer individuals for personal or household purposes. CBE
offers the following consumer loans.

 Condominium Loan  NGOs

 Mortgage Loan for Ethiopian  Personal Loan

Diaspora
 Automobile Loan
 Consumer Loans for Employees of
 Mortgage Loan
International Organizations and

3. International Trade Service

CBE offers different types of trade service products and services that facilitate import and export
activities.

• Documentary Credit • Advance Payment

• Documentary Collection • Consignment Basis Payment

8
 Practical report

• Guarantee ✓ Retention Guarantee and

✓ Bid Bond ✓ Customs Duty Guarantee

✓ Performance Bond • Franco Valuta Permit

✓ Advance Payment Guarantee • Small Items Export Permit

✓ Loan Guarantee

4. Money Transfer and Forex Services

• Local Money Transfer

• International Money Transfer

• SWIFT

• FCY Purchase

CBE purchases the following foreign currencies፡

• USD • Danish Kroner

• GBP • Japanese Yen

• EUR • Canadian Dollar

• Swiss Frank • Saudi Riyal

• Swedish Kroner • UAE Dirham

• Norwegian Kroner • Central Africa Frank

In addition to the above listed foreign currencies, CBE uses the following currencies in account
to account transfer for import/export and remittance purposes.

• Australian Dollar

9
 Practical report

• Chinese Yuan

• Indian Rupee

• South African Rand

5. Interest Free Banking

Sharia-compliant finance or Interest Free Banking Service is an alternative banking service that
operates based on the principles of Sharia which prohibits at the core the receipt and payment of
interest as well as working in areas forbidden by the religion of Islam. CBE offers the following
Interest Free Banking Services.

• Deposit and Investment;

• Financing;

• Guarantee;

• Trade Service;

• Money Transfer (Hawallah); and

• Foreign currency exchange.

6. Electronic Payment Services

CBE provides different banking services via electronic channels.

• CBE Birr ✓ Buy Goods

✓ Transfer Money ✓ Pay Bill

✓ Cash Out ✓ Check Balance

✓ Buy Airtime

10
 Practical report

✓ Others • Mobile Banking

• ATM • Internet Banking

• Forex ATM • Point-of-Sale Terminal (POS)

1.6 Program or project of the organization

1.6.1 Career and Succession Planning Management : -

The Bank shall implement succession planning whereby systematic & long term development of
high potential employees is ensured to replace key job incumbents as a need arises.
1.6.2 Career Development:-

The bank shall have job family categories to determine employee’s career progression and devel-
opment needs.
1.6.3 Management Trainee Program:-

The bank shall deploy management trainee program as talent management and development tool
to support the immediate to long term talent requirements for specific professional and manage-
rial roles

1.7 Financial performance

Commercial Bank of Ethiopia (CBE) Reported that it earned 27.5bln birr Gross Profit for
2022/2021 FY. This amounts to 527.48mln USD using July 29, 2022 exchange rates where
1USD = 52.1427 ETB. The profit showed an increment of 7.5 billion birr compared to the previ-
ous year. The bank’s assets reached 1.2 trillion birr (23 billion USD) making it one of the largest
companies in Ethiopia. The bank’s capital reached 59.1 bln birr (1.13bln usd) which makes it
the highest capitalized bank in Ethiopia. Compared to the private banks, all the private banks
combined capital is less than CBE’s capital.

11
 Practical report

CHAPTER TWO

MANAGEMENT AND TRAINING INFORMATION

2.1 Orientation of the branch manager given for me

Code of conducts

Honesty Impartiality
Responsiveness Loyalty
Confidentiality Accountability
Exercising Legitimate Authority Respecting the law
Exercising Leadership Transparency
Integrity

Working time

As a commercial bank of Ethiopia, their biggest service is to fulfill customer needs. When cus-
tomer needs are met, they reach their goals. In order to satisfy the customer, the use of time must
be convenient for the customer. Like commercial banks, there is a convenient use of time for the
customer. There are 6 working days in a week and he works for 9 hours a day. This means that
employees work in shifts. An employee works 42 hours a week, 3 days for 24 hours a week and
3 day 18 hours a week. From Monday to Saturday, the working hours are from 2:00 to 11:00.
This means that one employee comes in at 2:00 in the morning and leaves at 6:00 for lunch.

12
 Practical report

Then he comes back at 7:00 and works until 11:00. The rest of the employees come in at 3:30
and have lunch. He goes back out for lunch at 7, then comes back in at 8:30 and works until 11.

The Bank uses shifting system that best suits the need of work and customer Unauthorized ab-
sence and late coming entails penalty

Wearing style

For female For male

Suit
Skirt
Tie
Suit
Shirt with tie
Headwear
Facial hair
Hairstyle
Hairstyle
Makeup
Shoes
Perfumes and Deodorant
Shoes

Communications and institutional behavior

The Bank promotes open and honest communication in a timely manner, with a view to creating an envi-
ronment in which individuals can freely communicate their opinions. The Bank’s ensures staff are fully
informed of all relevant CBE duties to support its strategic direction

Disciplinary Measures

The Bank is duty bound to issue rules and regulations that clearly stipulate the rights and obligations of its
employees. Any breach of such rules and regulations shall constitute adequate ground for taking disci-
plinary measures.

13
 Practical report

Chapter Three

Job background and Information

3.1 Background of the department/division where you working

The commercial bank of Ethiopia (CBE) Gummer branch was located on Hosanna district that
was founds in the SNNP regional state in Guraghe zone Gummer woreda. And the bank was es-
tablished during the year 2015.During the year of establishment the CBE Gummer branch started
by six(6) employees, including the branch manager, now the branch has more than 15 employ-
ees. In gummer branch they have 15 employee include the branch manager. They have 2 auditor,
one business manager, one customer service manager,2 senior table employee,1chief casher and
the remain 7 employee are accountant or junior employee. The CBE Gummer branch employees
are performing their activities effectively and honestly. Customer service officer department is
one of the sectors of commercial bank of Ethiopia Gummer branch. It performs its duties and re-
sponsibility by setting specific and feasible goals and objectives which support to speed up cus-
tomer satisfaction and profit maximization of the bank.

3.2 Objectives and major responsibilities as well as activities of the department or division.

3.2.1 Objective of the Department.

 To ensure standardization and uniformity in the customer service process.

 To smoothly implement integrated banking solutions in customer service process.

 To have single source of reference to perform.

 To determine duties and responsibilities that each employee at all level in the customer
service process.

 To provide efficient and quality service to its customers.

3.2.2 Responsibilities as well as activities of the department/division

Bank customer service officers, also known as bank tellers, are responsible for accurately pro-
cessing routine transactions at a bank. These transactions may include processing deposits, col-

14
 Practical report

lecting loan payments, or cashing cheques. Bank customer service officers may also advise cus-
tomers on how to use the bank’s facilities, or provide basic information about products or ser-
vices. As a bank customer service officer, you would:

 Accept cash or money orders deposited by customers, credit customers accounts and is-
sue receipts and statements

 Pay money to or credit accounts for customers according to advice slips, cheques or other
banking documents, and debit appropriate accounts

 Conduct foreign currency transactions for overseas travelers

 Provide change and cash cheques

 Balance cash

 Answer customer enquiries

 Identify customer needs and refer customers to appropriate banking services and special-
ists

 Open and close accounts

3.3 The responsibilities and major activities me as a member of department

As department member I also have the responsibilities of performing the activities of the de-
partment. Based on those general activities, I perform the following specific activities as an ap-
prentice, when I was participating at commercial Bank of Ethiopia Gummer branch.

 I opened account for more than 15 customers by supporting employees

 I check the name, date and signature of the customer to be filled properly.

 I participated in different writing and typing activities that help for customer service.

 I accomplish a given work punctual and honestly by obeying the rules and regulation of
the organization.

15
 Practical report

 Protecting the office resource from damage.

 I gave different service for department and customers.

 I fill different forms by helping customers.

3.4 Performance Evaluation of my activities

From the first day that I have started practical work on Customer service department;

 I could understand how to deliver bank service to customers.

 I could understand the different type of communications in the organization at all.

 I understand what are the Asset, liability, revenue and expenses of the CBE bank

 I understand how bank sell and buy a bond and how it repay bond to its owner

 I have good communication with others at work place.

 To ask necessary data I could communicate with my manager from time to time etc…

CHAPTER FOUR

EVALUATING ACCOUNTING CONCEPTS IN PRACTICE

4.1 INTRODUCTION
One of the objectives of this practical attachment is to know how to do theoretical concepts in
practice. In the previous chapters I try to explain what are the product and services of the com-
mercial bank of Ethiopia, how it run this service and product. In this chapter, I will try to discuss
how to do practically accounting theoretical concepts in the commercial bank of Ethiopia.

4.2 The concepts of fundamental of accounting

To run and deliver services commercial bank of Ethiopia uses all concepts of accounting. And al-
most there is no difference between theory and practice, but most of the time we don’t see unless
we read the procedure of the bank. Now I will describe what are the related concept in the con-
cepts of fundamental accounting. In the accounting they have five elements. Those are Asset, lia-

16
 Practical report

bility, owner equity, revenue and expenses. Out five the first three are the major elements for all
those elements widely used in the commercial bank of Ethiopia. Now the question is what are the
asset, liability, owner equity, revenue and expense in CBE bank of Ethiopia. Let us see one by
one shortly.

The three elements of the accounting equation are assets, liabilities, and shareholders' equity. The
formula is straightforward: A CBE total assets are equal to its liabilities plus its shareholders' eq-
uity. The double-entry bookkeeping system, which has been adopted globally, is designed to ac-
curately reflect a CBE total assets.

What are the Assets of the CBE bank?

An asset is anything with economic value that a company controls that can be used to benefit the
business now or in the future. The question is what are the asset of the CBE bank. Let see with
its chart of account.

Assets - include any tangible and intangible items that have monetary value to and owned by a
business.

 Cash on hand
 Deposit with Foreign Banks
 Deposit with Domestic banks

The GL accounts under this category are

 Payment and Settlement with the NBE

 Statutory Reserve Account

 Fixed Deposit with other domestic banks

 Our correspondent ECX Accounts

 Short term Investments in securi-  Suspense Accounts A/R

ties  Account Receivables

17
 Practical report

 Foreign Receivable  Office and other

 Branch /Head Office Receivable Equipment
 Loan and advance
 Computer and Acces-
 Deferred charges
sories
 Stock account
 Prepaid expense/ deferred charge  Premises
 Fixed Assets 11000
 Motor vehicles
 Furniture and fittings

What are the liability of the CBE bank?

Liabilities - refer to obligations of a business to pay cash, perform service or deliver goods to its
creditor. Liabilities are further divided into current and non-current.

 Current liabilities - refer to obligations that must be paid/settled within one year or less.
 Non-current liabilities - also called long-term liabilities refer to obligations that are ex-
pected to be settled over an extended period of time usually more than a year.

For example

 Demand Deposit
 Saving Deposit
 Fixed Deposit
 Resident Foreign Currency Deposit

Non- Resident Deposits

 Other Liability Accounts/ Account payables

Blocked Accounts 16800

 Margin on LC, Blocked c/a payable,

 Blocked s/a payable

18
 Practical report

Tax payable 17200

 Employee income tax, Interest tax payable on deposit (5%)

Branch A/payable 17500

o Adjustment & refund, CPO issued payable, DD draft payable, TT payable, mis-
cellaneous a/p, pos settlement, LMTS payable, stamp duty charge and etc

 Head office A/payable 12572

o Blocking inward s/a, c/a , TT received before test message, etc

What Is Owner Equity in CBE bank?

Owners Equity - refers to residual claim of the owner against the assets of a business. which in-
cludes capital, revenue, expense and withdraw

Shareholders' equity is the total value of the company expressed in dollars. Put another way, it is
the amount that would remain if the company liquidated all of its assets and paid off all of its
debts. The remainder is the shareholders' equity, which would be returned to them.

 Capital and Reserve Accounts

The GL accounts under this category are
 Paid –up capital
 Legal reserve
 Profit and Loss account
 Retained Earnings
 Income Accounts
 Product Related account 50000
 Interest Income on Loans and Advances 51000
 Interest on securities and placement / Dividend earned
 Commission Income 52000
 Other Income 65200 non product related

19
 Practical report

 Cheque Stop Payment Charges

 Cheque Issue Charges
 commission Income on Outward Blocking – Local
 Commission Incomes on Foreign Cheque
 Expense Accounts

Non Product related Account 60000

 Interest Expense 50001 (Product related)

 Salaries and Employees benefits 60001

 Allowance Expense 60400

 Other employee expense – OT, Bonus, Funeral, maternity expense etc

 General Expense 62000

Revenue and Expense Recognition

Interest income and expense are recognized in profit or loss using the effective interest
method. The effective interest rate is the rate that discounts the estimated future cash payments
or receipts through the expected life of the financial instrument to:

• The gross carrying amount of the financial assets; or

• The amortized cost of the financial liability.

When calculating the effective interest rate for financial instruments other than credit-impaired
assets, the Bank estimates future cash flows considering all contractual terms of the financial in-
strument, but not future credit losses. For credit-impaired financial assets, a credit adjusted effec-
tive interest rate is calculating using estimated future cash flows including incurred credit losses.
The calculation of the effective interest rate includes transactions costs, fees and points
paid or received that are an integral part of the effective interest rate. Transaction costs include

20
 Practical report

incremental costs that are directly attributable to the acquisition or issue of a financial asset or fi-
nancial liability.

Calculation of Interest Income and Expenses

In calculating interest income and expenses, the effective interest rate is applied to the gross car-
rying amount of the asset (when the asset is not credit-impaired) or to the amortized cost of the
liability. However, for financial assets that have become credit-impaired subsequent to ini-
tial recognition, interest income is calculated by applying the effective interest rate to the amor-
tized cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of
interest income reverts to the gross basis. For financial assets that were credit-impaired on initial
recognition, interest income is calculated by applying the credit-adjusted effective interest rate to
the amortized cost of the asset. The calculation of interest income does not revert to a gross ba-
sis, even if the credit risk of the asset improves.

Presentation of Interest Income and Expenses

Interest income and expense presented in the statement of profit or loss and OCI include:

• Interest on financial assets and financial liabilities measured at amortised cost calculated
on an effective interest basis;
• Interest on debt instruments measured at FVOCI calculated on an effective interest basis;
• The effective portion of fair value changes in qualifying hedging derivatives designated
in cash flow hedges of variability in interest cash flows, in the same period as the hedged
cash flows affect interest income/expense; and
• The effective portion of fair value changes in qualifying hedging derivatives designated
in fair value hedges of interest rate risk.

Fees and Commissions

Fees and commission income and expense that are integral to the effective interest rate on a fi-
nancial asset or financial liability are included in the measurement of the effective interest rate.
Other fees and commission income relate mainly to commissions on local money transfers

21
 Practical report

(LMTS), guarantee commission, outward remittance, card charges, and commission on import
letter of credit– are recognized as the related services are performed. Other fees and commission
expense relate mainly to transaction and service fees, which are expensed as the services are re-
ceived.

4.3 In the concepts of financial accounting

In this concept I will try to explain what are the bank property, plant, and equipment? And how
CBE uses depreciation method, the impairment concept, the concepts of financial assets and fi-
nancial liabilities and so on.

Property, Plant and Equipment

(i) Recognition and Measurement

Items of property, plant and equipment are measured at cost, which includes capitalized
borrowing costs, less accumulated depreciation and cumulative impairment losses. Purchased
software that is integral to the functionality of the related equipment is capitalized as part of that
equipment. If significant parts of an item of property or equipment have different useful lives,
then they are accounted for as separate items (major components) of property and equipment.
Any gain or loss on disposal of an item of property, plant and equipment are determined by com-
paring the proceeds from disposal with the carrying amount of property, plant and equipment,
and are recognized net within operating and administrative expenses in profit or loss.

(ii) Subsequent Costs

Subsequent expenditure is capitalized only when it is probable that the future economic benefits
of the expenditure will flow to the Group. Minor ongoing repairs and maintenance are expensed
as incurred.

(iii) Depreciation

In our classes we learned about methods of depreciation. They have four methods of deprecia-
tion. Those are:

1. Activity method

22
 Practical report

2. Strait line method

3. Declining method and
4. Sum of the year method

In CBE bank used straight line method. Depreciation is calculated to write off the cost of items
of property and equipment less their estimated residual values using the straight-line method
over their estimated useful lives, and is generally recognized in profit or loss. Leased assets
are depreciated over the shorter of the lease term and their useful lives unless it is reasonably cer-
tain that the Group will obtain ownership by the end of the lease term. Land is not depreciated.
Depreciation is charged on the straight –line basis at the following rates per annum.

Building 5%

Computer equipment 25%

Fixtures, fittings and equipment 20%

Motor vehicles 20%

Depreciation methods, useful lives and residual values are reviewed at each financial
year-end and adjusted if appropriate. Minor repairs and maintenance costs are expense as in-
curred.

Financial Assets and Financial Liabilities

I. Recognition and initial measurement

All other financial assets and liabilities (including assets designated at fair value through profit or
loss) are initially recognized on the trade date on which the Group becomes a party to the con-
tractual provision of the instrument.

A financial asset or liability is initially measured at fair value plus (for an item not sub-
sequently measured at fair value through profit or loss) transaction costs that are directly
attributable to its acquisition or issue. Subsequent to initial recognition, financial liabilities (de-

23
 Practical report

posits and debt securities) are measured at their amortized cost using the effective interest
method.

II. Classification and Measurement of Financial Assets

On initial recognition, financial assets are classified into one of the following measurement cate-
gories:

• Amortized cost;

• Fair value through other comprehensive income (FVOCI);

• Fair value through profit or loss (FVTPL);

• Elected at fair value through other comprehensive income (equities only); or

• Designated at FVTPL.

Financial assets include both debt and equity instruments.

A financial asset is measured at amortized cost if it meets both of the following conditions and is
not designated as at FVTPL:

 The asset is held within a business model whose objective is to hold assets to collect con-
tractual cash flows; and
 The contractual terms of the financial asset give rise on specified dates to cash flows that
are solely payments of principal and interest on the principal amount outstanding.

A debt instrument is measured at FVOCI only if it meets both of the following conditions and is
not designated as at FVTPL:

 The asset is held within a business model whose objective is achieved by both collecting
contractual cash flows and selling financial assets; and
 The contractual terms of the financial asset give rise on specified dates to cash flows that
are solely payments of principal and interest on the principal amount outstanding.

24
 Practical report

On initial recognition of an equity investment that is not held for trading, the Bank may irrevoca-
bly elect to present subsequent changes in fair value in OCI. This election is made on an invest-
ment-by investment basis.

All other financial assets are classified as measured at FVTPL.

In addition, on initial recognition, the Group may irrevocably designate a financial asset that oth-
erwise meets the requirements to be measured at amortized cost or at FVOCI as at FVTPL if do-
ing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Debt instruments, including loans and debt securities, are classified into one of the fol-
lowing measurement categories:

• Amortized cost;
• Fair value through other comprehensive income (FVOCI);
• Fair value through profit or loss (FVTPL); or
• Designated at FVTPL

Classification of debt instruments is determined based on:

 (i)The business model under which the asset is held; and

 (ii) The contractual cash flow characteristics of the instrument.

Equity instruments

Equity instruments are classified into one of the following measurement categories:

• Fair value through profit or loss (FVTPL); or

• Elected at fair value through other comprehensive income (FVOCI).

Equity instruments measured at FVTPL

Equity instruments are measured at FVTPL, unless an election is made to designate them at
FVOCI upon purchase, with transaction costs recognized immediately in the Statement of profit
or loss and other comprehensive income as part of Non-interest income.

25
 Practical report

Equity instruments measured at FVOCI

At initial recognition, there is an irrevocable option for the Group to classify non-trading
equity instruments at FVOCI. This election is used for certain equity investments for strategic or
longer term investment purposes. This election is made on an instrument-by-instrument basis and
is not available to equity instruments that are held for trading purposes.

Classification and Measurement of Financial Liabilities

The Group classifies its financial liabilities, other than financial guarantees and loan commit-
ments, as measured at amortized cost.

III. Derecogntion

Financial Assets

The Group derecognizes a financial asset when the contractual rights to the cash flows
from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a
transaction in which substantially all of the risks and rewards of ownership of the financial asset
are transferred or in which the Group neither transfers nor retains substantially all of the risks
and rewards of ownership and it does not retain control of the financial asset.

Financial Liabilities

The Group derecognizes a financial liability when its contractual obligations are dis-
charged or cancelled, or expire.

IV. Modifications of Financial Assets and Financial Liabilities

Financial Assets

If the terms of a financial asset are modified, the Group evaluates whether the cash
flows of the modified asset are substantially different. If the cash flows are substantially
different, then the contractual rights to cash flows from the original financial asset are deemed
to have expired. In this case, the original financial asset is derecognized and a new financial asset
is recognized at fair value.

26
 Practical report

Financial Liabilities

The Group derecognizes a financial liability when its terms are modified and the cash flows of
the modified liability are substantially different. In this case, a new financial liability based on
the modified terms is recognized at fair value. The difference between the carrying amount of the
financial liability extinguished and the new financial liability with modified terms is recognized
in profit or loss.

V. Amortized Cost Measurement

The ‘amortized cost’ of a financial asset or financial liability is the amount at which the financial
asset or financial liability is measured at initial recognition, minus principal repayments,
plus or minus the cumulative amortization using the effective interest method of any difference
between the initial amount recognized and the maturity amount, minus any reduction for impair-
ment.

VI. Fair Value Measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date in the principal or, in its
absence, the most advantageous market to which the Group has access at that date. The fair value
of a liability reflects its non-performance risk.

VII. Non-current Assets Held for Sale

Non-Current assets held for sale correspond to Acquire assets such as real estate and moveable
property foreclosed in the absence of repayment of loans due to the Group. This type of non-cur-
rent available-for-sale assets are expected to be recovered mainly through sale and not through
continued use. The value of these assets is updated through an internal appraisal made within
three months of the date on which the Group acquires ownership; therefore if the appraisal value
is less than carrying value, a valuation reserve is created and charged to the year’s income. If the
sale is paid up-front and the amount recovered exceeds the carrying amount, the difference is di-
rectly recorded in the year’s income.

27
 Practical report

Intangible Assets

Software

All CBE bank works do by one software this software is known as t_24 software. This Software
acquired by the Group is measured at cost less accumulated amortization and any impairment
losses. Subsequent expenditure on software assets is capitalized only when it increases the future
economic benefits embodied in the specific asset to which it relates. All other expenditure is ex-
pensed as incurred. Software is amortized on a straight-line basis in profit or loss over its
estimated useful life, from the date on which it is available for use. The estimated useful
life of software for the current and comparative periods is four years. Amortization methods,
useful lives and residual values are reviewed at each reporting date and adjusted as found
appropriate.

Dividend Income

Dividend income is recognized when the right to receive income is established. Dividends are
presented in net trading income, net income from other financial instruments at fair value
through profit or loss or other revenue based on the underlying classification of the equity invest-
ment.

(t) Income Tax

Income tax expense comprises current and deferred tax. It is recognized in profit or loss except
to the extent that it relates to items recognized directly in equity or in OCI.

Current Tax

The current income tax is the expected tax payable on the taxable income for the year and any
adjustment to the tax payable in respect of previous years. The amount of current tax payable is
the best estimate of tax amount expected to be paid or received that reflects the uncertainty re-
lated to income taxes, if any. It is measured using tax rates enacted or substantially enacted at the
reporting date.

Deferred Tax

28
 Practical report

Deferred tax is measured under the asset and liability method. Deferred tax assets and lia-
bilities are recognized for the future tax consequences attributable to temporary differences be-
tween such values. Deferred tax assets and liabilities are measured using enacted tax rates ex-
pected to apply to temporary differences when recovered or settled in each of the jurisdictions
where the subsidiaries of the Bank operate, based on laws enacted or substantially enacted as of
the reporting date.

4.3 In the concepts of financial management

In this course, they have so many concepts that related to the commercial bank of Ethiopia. But,
we will try to review the concept of cash management.

Cash management: the handling of daily cash operation as per

Cash management is simply defined as making the right amount of money available at the right
time and the right place to meet the government's obligations in the most cost-effective way.

Cash management comprises the operational and banking processes associated with the collec-
tion, aggregation, holding and disbursement of cash. The Financial Management Act 1995 pro-
vides that Accountable Officers have specific accountabilities for the efficient, effective and ethi-
cal use of resources

In a banking institution, the term Cash Management refers to the day-to-day administration of
managing cash inflows and outflows. Because of the multitude of cash transactions on a daily ba-
sis, they must be managed. The ultimate goal of cash management is to maximize liquidity and
minimize the cost of funds.

Day to day they managed cash by the system. All senior officers are take money from chief
casher in the morning and they are used for customer withdraw and also they receive from cus-
tomer deposit at the end the remain amount they back to chief casher. This do by system. All em-
ployee has its own code. Let see step by step

1. All employee has its own pity cash box and chief casher transfer by their till code. This is
known as till to till transfer.

29
 Practical report

2. Senior officer (front) give service for the customer by depositing and withdraw service
3. If the officer box empty, they receive money from chief casher and chief cashier transfer
the amount of cash to senior officer by their till code
4. At the end senior officer close daily transaction by make balance. The daily closing con-
sists of the following activities:
 Checked all the tickets (like S/A, C/A, Loan etc) to their respective accounts, sub-
sidiary and general ledger accounts.
 Sort out the daily tickets by the order of the GLP, print and sign the posting journal/
Trial Report and hand over to the Branch Controllers for checking and custody.
 Sort out all the tickets into their general ledger classification; record them to the jour-
nal and summarize and balance all debit and credit sides of the journal.
 Checked overall balance of branch cash.
 At last file it properly.

4.4 Other related concepts

Many of the theories that we learned in the class are directly or indirectly related with practical
work that I observed. Let us see some of the theories applied in the work place. For example

 Auditing concepts
 Principle of marketing
 Cost and they have more but I cannot explain briefly because I cannot cover the cost and we
are not learn before more concept

Chapter Five

SWOT Analysis

5.1 Introduction
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats, and so a SWOT analysis is
a technique for assessing these four aspects of your business. SWOT Analysis is a tool that can
help you to analyze what your company does best now, and to devise a successful strategy for
the future. SWOT can also uncover areas of the business that are holding you back, or that your

30
 Practical report

competitors could exploit if you don't protect yourself. A SWOT analysis examines both internal
and external factors – that is, what's going on inside and outside your organization. SWOT Anal-
ysis can help you to challenge risky assumptions and to uncover dangerous blind spots about
your organization's performance. If you use it carefully and collaboratively, it can deliver new in-
sights on where your business currently is, and help you to develop exactly the right strategy for
any situation.

5.2 Strength, Weakness, Opportunity and Treat (SWOT) Analysis of the CBE
Like any financial organizations Commercial bank of Ethiopia can also be affected by changing
environment. Therefore, it is necessary to know SWOT analysis of the bank. It provides a strate-
gic SWOT analysis of the bank business and operations. The following are some of the SWOT
analysis of CBE:-

Strengths

 What do you do well?

 What unique resources can you draw on?

 What do others see as your strengths?

Strengths are things that your organization does particularly well, or in a way that distinguishes
you from your competitors. Think about the advantages your organization has over other organi-
zations. These might be the motivation of your staff, access to certain materials, or a strong set of
manufacturing processes. The following are Strength of CBE

 Secure and reliable services tailored to meet customers’ needs;

 It gives priority to public interest ;

 Financial leverage

 Strong management-it can help CBE reach its potential by utilizing strengths and elimi-
nating weakness;

 Decentralized working environment

31
 Practical report

 Innovative Culture: it helps CBE to produce unique products and services that meet their
customers need ;

 Size advantages: it lowers CBE’s risk’s, the larger CBE gets, the more resources they
have to pursue new markets and defend themselves;

 Economies of Scale: it is the cost advantages that CBE obtains due to size, the greater the
volume, the greater the advantages;

 Technology: superior technology allows CBE to better meet the needs of their customer’s
in ways that competitors can’t imitate;

 Customer loyalty

Weaknesses

 What could you improve?

 Where do you have fewer resources than others?

 What are others likely to see as weaknesses?

Weaknesses, like strengths, are inherent features of your organization, so focus on your people,
resources, systems, and procedures. Think about what you could improve, and the sorts of prac-
tices you should avoid. The following are Weakness of CBE

 Poor cost efficiency

 Targeting price elastic

 Investment in research & development

 Limited online advertising experience

 Low salary compared with many private bank

 Presence of offline branches

32
 Practical report

Opportunities

 What opportunities are open to you?

 What trends could you take advantage of?

 How can you turn your strengths into opportunities?

Opportunities are openings or chances for something positive to happen, but you'll need to claim
them for yourself!.They usually arise from situations outside your organization, and require an
eye to what might happen in the future. They might arise as developments in the market you
serve, or in the technology you use. Being able to spot and exploit opportunities can make a huge
difference to your organization's ability to compete and take the lead in your market. The follow-
ing are opportunity of CBE

 Income level is at a constant increase

 Population growth

 New products and Services:-

 Growing economy

 New Technology

 Vision to become World Class Commercial Bank in 2025

Threats

 What threats could harm you?

 What is your competition doing?

 What threats do your weaknesses expose to you?

Threats include anything that can negatively affect your business from the outside, such as sup-
ply-chain problems, shifts in market requirements, or a shortage of recruits. It's vital to anticipate

33
 Practical report

threats and to take action against them before you become a victim of them and your growth
stalls. The following are threats of CBE

 Increase in labor costs

 Growing competition

 External business risks

Chapter six

Evaluation, Conclusion and Recommendation

6.1 Challenges and Problems encountered on the job and remedial measures
As I am new for the job I have faced various challenges during the practical work. Some of the
problems that encountered me during the practical work time are summarized below:-

 Low knowledge about the office manner of the bank: - at the beginning time of the practi-
cal work I have a little knowledge of the manner of the bank like wearing & working
time.

 Low knowledge about the work flow/process of the bank

 Low knowledge about the function of office materials/equipment

 Low knowledge about the rules & directives of the bank

 Low skills about the customer handling of the branch

34
 Practical report

In order to overcome the above problems I was took various actions. Some of the actions that I
took to overcome the challenges are:-

 By reading and understanding various documents like various Memo and Manuals related
with the bank workflow/process.

 By asking senior staffs and manager / supervisory about the workflow, office manner,
and related issues

 By reading various books and materials from other sources

 Induction from manager/supervisor about the workflow, office manner and customer han-
dling .

6.2 Problem of division or department and suggested solutions

The major problems that face the department are the following.

 There is a big internet connection problem or network problem.

 There is inefficiency of some materials like chair, table and so on.

 Some workers have problems on their behavior and didn’t give proper service to cus-
tomer.

Suggested solutions for the problems

 Asking concerned body to get enough networks that help to provide proper service for
customer.

 To solve the problems of inefficiency of materials by asking additional budget for the
department and purchasing this materials and make available for the department.

 The office should have hire authors employees as additional.

Major Challenges and Problems that I faced during Practical Attachment

There are a lot of problems that I faced during my practical attachment.

35
 Practical report

 Time constraint- the duration is not enough to cover all work processes.

 Budget constraint- the budget provided by university is not sufficient to cover attachment
cost

 The linkage between university and the organization that I conducted practical attach-
ment is not strong

In order to overcome the above problems the following action should be considered:-

 The practical work duration should be increases

 The university should increase budget for practical attachment

 The university should be actively involved in assisting students in getting organizations

where they conduct their attachment

6.3 Significance of Practical Attachment

Practical attachment is an essential for the development of the practical and professional skills
required for a real work and an aid to prospective employment. It helps students the opportunity
to apply knowledge in real work, exposing students to work methods not taught in the university
and as well as assessing students interest in the occupation he/she plans to undertake. In addition
to that it enables to know theories and principles I have learned in a class practically. Therefore,
practical attachment has paramount benefits to my study and to my future career in the field.

There are a lot of significant of practical attachments for the students, university and for society.
Some of the significances are listed below:-

Practical attachment gives students the opportunity to apply the knowledge and skill they have
acquired on campus in a real-life work situation.

 It enables student to be familiar with practical work when they complete their academic
year;

 It develops student’s research making skill.

36
 Practical report

 It develops student’s skill to solve challenges or problem that they faced during aca-
demic year or their practical work;

 It enables employers to recruit graduates familiarized with practical work

 It enhances employability skills of the students.

 It helps students’ to develop decision making skills, critical thinking skills, increased con-
fidence and self-esteem.

6.4 Relevance of Practical Attachment to my studies

I have acquired a lot of benefits from practical attachment to my studies. Some of the relevance’s
of practical attachment are stated below:-

 Many operational part of the bank are related with theoretical knowledge that I acquired
from my study, so it enables me to develop my theoretical knowledge with practical skill;

 It helps me to apply knowledge I gained in the classroom;

 Practical work enables me to narrow the gap between theoretical knowledge and practical
skills related with my study;

 It enhances learning and understanding of issues relevant to a particular area of study;

6.6 Summery, Conclusion and Recommendation

This part summarizes the findings, discusses the conclusions drawn from the study, and provides
recommendations.

6.6.1 Summary of the Attachment

The main objectives of this practical attachment was to give students the opportunity to apply the
knowledge and skills they have acquired on campus in a real-life work situation, to expose stu-
dents to a work environment, common practices, employment opportunities and work ethics in
their relevant field, to strength linkages between university and employers, and to identify chal-
lenges and problems that students will face on the job after they complete their academic life.
Organizational background, its mission, vision and values, organizational structure, SWOT anal-

37
 Practical report

ysis, and various challenges and problems that affect organization at current time of CBE has in-
vestigated in the attachment.CBE has largest commercial bank in the country and it has huge
capital, skilled manpower and more than 1616 branches stretched across the country. The organi-
zation has the capacity and willingness to contribute to economic growth of the country by mobi-
lizing resources of the country. Various challenges and problems that faced organization in gen-
eral and CBE shanty branch particularly in current time has investigated. Some of the challenges
of CBE that indicated above are inflation, lack of infrastructures, lack of awareness about the
banks product and service and competitive environment. In addition to that big internet connec-
tion/network problem and inefficiency of materials are the major challenges of CBE Gummer
branch.

6.6.2 Conclusion
The attachment ascertains that creating strong relation between university and employers has
great advantages for students, university and generally for the society. Many Ethiopian higher
education institutions do not create practical attachment chance for their students. Rather they fo-
cused on teaching theoretical part and that creates challenge for the students in their employment
after they complete academic life.

On the other hand many challenges and problems observed in the organizations where the prac-
tical attachment was conducted and knowing challenges and problems of organizations may de-
velop problem solving skill of the students. Therefore, conducting practical attachment is impor-
tant for students, university, employers and for society generally.

6.6.3 Recommendation
Based on the findings of the practical attachment, the following are recommended for the con-
cerned organs:-

 The university should increase duration time of the practical attachment;

 Service excellence is useful for CBE to compete with private banks. The bank should ex-
pand modern banking service specially E-banking service to its customer;

 CBE should give due attention for research and development;

38
 Practical report

 CBE should take action to mobilize and collect resources from growing economy of the
country;

 The university should provide adequate budget for practical attachment;

 The university should strength linkages with organizations where the attachment con-
ducted;

 The university should give orientation/induction about practical attachment to their stu-
dents. It enables students to become pre-oriented about practical work environment.

 Students must be attend all classes because they miss basic things for their life

Like other private bank CBE should pay better salary to its employee due to employee satisfac-
tion is one among the values of the bank, in addition to that better salary may reduce skilled and
experienced employee flow to private bank.

Reference
 African Union (2007), strategy to revitalize technical and vocational education and train-
ing (TVET) in Africa, Addis Abeba: Final Draft. Bureau of the Conference of Ministers
of Education of the African Union
 CBE Annual Report for 2015/16 Budget Year
 Customer Accounts & Transaction Service Procedure Draft (Revised Procedure) Febru-
ary 2012
 Direct information from the observation of the organization
 from employees of organization
 Information from written documents of organization
 some from daily activities
 Some oral information from employees

39
Practical report

40