Account and budget service Level III

CODE 2
Project I: Process Financial Transaction and Extract Interim Reports, Administer Subsidiary Accounts and
Ledgers, Administer Financial Accounts and prepare Financial Reports
List of income statement accounts with their respective values for TIKUR ABAY Construction share company
for the year ended seen 30, 2005.
Sales 200,000.00
Sales return and allowance 2,000.00
Sales discount 1,500.00
Cost of goods sold 110,600.00
Operating expenses 26,100.00
Internet expense 3,000.00
Operating expenses includes entertainment and uncollectable account expenses of birr 6,000.00 & 2,700.00
respectively. Assume that the construction is expected to pay 30% profit tax. The board director of the
company notice that it is decided to distribute 60% of net income after tax will be distributed to the
shareholders as a divided.
Tasks 1.1 demonstrates (prepare) income statement for tax purpose for the year.
Task 1.2 demonstrates (calculate) profit tax liability.
Task 1.3 demonstrates (calculate) divided tax liability of the year
Task 1.4 demonstrates (calculate) net dividend pay out to the shareholders.
Possible solution
Task 1.1

TikurAbay Construction s.c

Income statement
For the year ended sene 30, 2005
Sales ------------------------------------------------------------------------------------------ 200,000.00
Sales return and Allowance ------------- 2,000.00
Sales discount ------------------------------- 1,500.00 ------------------- 3,500.00 = 196,500.00
Cost of goods sold ------------------------------------------------------------------------ (110,600.00)
Gross profit --------------------------------------------------------------------------------- 85,900.00
Operating expense for Tax purpose only --------- 26,100.00 – 8,700.00 = 17,400.00
Interest expense -------------------------------------------------------------------------- 3,000.00
Total Expense ----------------------------------------------------------------------------- 20,400.00
Income before Tax ----------------------------------------------------------------------- 65,500.00
Profit tax (30%) ---------------------------------------------------------------------------- 19,650.00
Net income after Tax --------------------------------------------------------------------- 45,850.00
Task 1.2 profit tax liability = 65,500*30% = 19,650.00
Task 1.3 Gross profits – Total expenses
NIBT = 85,900.00 – (26,100.00 + 3,000.00)
85,900 – 29,100.00 = 56,800.00
Profit Tax 19,650.00

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 Net income available for dividend and retain earnings is 56,800 – 19,650 = 37,150.00
So dividend will be 60% * 37,150.00 = 22,290.00
Dividend tax liability is 22,290.00 * 10% = 2,229.00

Task 1.4 Net dividend pay to shareholders will be BR 20,061.00 = (22,290 -2,229)
Project 2: Process payment Documentation, process payroll and calculate Taxes, fees and charges
Addis Textile factory is registered company in Ethiopia engaged in Exporting of Textile products to Asia and
Europe. The company has operational and Administrative staffs. For the month of September 2013 the
accountant of Addis Textile factory prepares payroll and process the payments through bank accounts for
each employee.The Accountant has the following information to prepare September payroll.
Employee name Position Basic salary Allowance Overtime
Bedelu Samuel Supervisor 4,560.00 500.00 1,200.00
AberaBelelegn Technician 3,570.00 500.00 1,500.00
AlazarHailu Technician 2,750.00 200.00 700.00
Belay Seman Administrator 5,300.00 700.00 -
DebasuGetahun Accountant 1,540.00 350.00 750.00

Additional Information
 Allowance of each employees is not taxable
 Pension contribution is 11% from Employer and 7% from employee
 All employees are permanent
 Bank service charge for each employee is 20 Birr paid by the employer
Task 2.1 Prepare Payroll document for the month of September 2013.
Task2.2 Calculate the amount of income tax. Pension and charges paid to the concerned bodies
Task 2.3 Record the necessary Payroll entries for the month of September 2013 for the payment

Possible solution
Task 2.1
Name of Basic Non Overtim Total Taxable Income Pension Total Net pay
Employe Salary Taxable e earning earning tax deductio
e Allowan earning n
ce
Bedelu 4,560.00 500.00 1,200.00 6,260.00 5,760.00 875.00 319.20 1,194.20 5,065.00
Samuel
AberaBel 3,570.00 500.00 1,500.00 5,570.00 5,070.00 711.50 249.90 961.40 4,608.60
elegn
AlazarHai 2,750.00 200.00 700.00 3,650.00 3,450.00 387.50 192.50 580.00 3,070.00
lu
Belay 5,300.00 700.00 - 6,000.00 5,300.00 760.00 371.00 1,131.00 4,869.00
Seman
DebasuG 1,540.00 350.00 750.00 2,640.00 2,290.00 201.00 107.80 308.80 2,331.20
etahun
17,720.00 2,250.00 4,150.00 24,120.00 21,870.00 2,935.00 1,240.40 4,175.40 19,944.60
Task 2.2
Income tax = 2,935.00

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Pension = 1240.40 + (17,720)*11% = 1,240.40+1,949.20 = 3,189.60
Service charge = 20*5 = 100.00

Task 2.3
Salary expense 24, 120.00
Income tax payable 2,935.00
Pension payable 1,240.40
Cash 19,944.60
Pension expense-------------------1,949.20
Pension payable-------------------------------------------1,949.20
Income tax payable 2,935.00
Cash 2,935.00
Pension Payable 3,189.60
Cash 3,189.60
Bank service charge (20*5) 100.00
Cash 100.00
Project 3 Monitor and Control Accounts Receivable and Balance cash Holdings
The following data pertain to Nunn Company
1. Balance per Bank statement dated March 31, 20X8, is Br 8,900.00
2. Balance of the cash account on the company’s books as of March 31, 20X8, is Br 8,918.00
3. The Br 2,600.00 deposit of March 31 was not shown on the Bank statement
4. Of the checks recorded cash disbursement in March some checks totaling Br 2,100.00 have not yet
cleared the bank
5. Service and collection charges for the month were Br 20.00
6. The bank erroneously charged the Nunn company account for the Br 400.00 check of another
company
7. The bank credited the company’s account with the Br 2,000.00 proceeds of non – interest bearing
note that it collected for the company
8. A customer’s Br 150.00 check marked NSF was returned with the bank statement ( Written to Nunn
company)
9. As directed the bank paid and charged to the company’s account a Br 1,015.00 non – interest
bearing non Nunn company, the company has not recorded this payment
10. A cash receipts of Br 263.00 was recorded in the cash receipts journal as Br 236.00
11. The bank credited the company for Br 40.00 of interest earned on the company’s checking account
Required
Task 3.1 Prepared bank reconciliation as of March 31, 2008
Task 3.2 Prepare the necessary journal entries
Possible solution
Task 3.1
Nunn Company
Bank reconciliation
March 31, 2008

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Balance per bank -------------------------------------------------------------------------------------- 8,900
Add deposit in transit -------------------------------------------------- 2,600.00
Errors made by Bank ---------------------------------------------------- 400.00 ------------- 3,000.00
Subtotal ----------------------------------------------------------------------------------------------- 11,900.00
Deduct outstanding checks ----------------------------------------------------------------------- (2,100.00)
Adjusted balance ------------------------------------------------------------------------------------- 9,800.00
Balance per depositor ------------------------------------------------------------------------------ 8,918.00
Add Collection by Bank ------------------------------------------------- 2,000.00
Interest earned ------------------------------------------------------------ 40.00
Errors made by depositor ------------------------------------------------ 27.00 ----------------- 2,067.00
Subtotal ------------------------------------------------------------------------------------------------- 10,985.00
Deduct Service charge --------------------------------------------------- 20.00
Note payment by Bank -------------------------------------------------- 1,015.00
NSF ---------------------------------------------------------------------------- 150.00 ----------------- 1,185.00
Adjusted balance --------------------------------------------------------------------------------------- 9,800.00
Task 3.2
1. To record error
Cash in bank ------------------------- 27.00
Account Receivable -------------- 27.00

2. To recorded cash collection

Cash in bank --------------------------- 2,040.00
Note Receivable ----------------------- 2,000.00
Interest income ------------------------ 40.00
3. To record bank charge and non-interest bearing charge
Bank service charge -------------------------------- 20
Note payable -------------------------------------- 1,015.00
Cash in Bank ---------------------------------------- 1,035.00
4. To record NSF
Account receivable ----------------------------- 150.00
Cash in Bank ------------------------------------- 150.00
Project 4 Handle Foreign Currency Transactions
Jittu Horticultural PLC is engaged in horticulture activities in order to producing different fruits and
vegetables. The company is exporting its product to European and Middle East countries. At the same time
company is importing different packing materials in order to pack its products and fertilizers from abroad.
On May 1, 2013 the company cash balance indicated in bank account was Br 1,500,000.00 on May 10, 2013
fund was transferred to the company accounts USD 50,000.00 and Euro 100,000.00 from their customers.
During May the company also imported different items costing FOB USD 35,000.00 Br 10,000.00, 50,000.00
and 120,000.00 was paid for insurance, fright and customsrespectively to the imported items.
Assume that the following exchange rate is applicable during the month of May 2013. (Constant)
USD EURO
Buying 18.80 25.50
Selling 19.20 26.00

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Assume that when there is fund transfer in to the company account the buying rate is applied and for
importing purpose selling rate is applied
Task 4.1 Demonstrate (determine) the total cost of the imported materials assume that there is 3% of Bank
service charge on FOB value
Task 4.2 Demonstrate (calculate) the total fund transferred to the company account in items of Birr during
the month
Task 4.3 what will be the balance of cash In bank account assume that there was no any withdraw during
the month except for the import purpose in terms of Birr
Possible solution
Task 4.1 FOB value (USD) ------------ 35,000*19.20 = 672,000.00
Insurance --------------------------------------------- 10,000.00
Fright --------------------------------------------------- 50,000.00
Custom ------------------------------------------------- 120,000.00
Bank service charge (672,000.00*3%/100) ---- 20,160.00
Total Imported cost ---------------------------------- 872,160.00
Task 4.2 USD 50,000*18.80 +EURO 100,000.00*25.50
940,000.00 + 2,550,000.00 = 3,490,000.00
Task 4.3 (1,550,000 + 3,490,000.00) – 872,160.00
4,990,000 – 872,160.00 = 4,117,840.00

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