Formation of Business Type

Legal Persons
There are two kinds of legal person.
1. Natural Person (physical person) 18 years and above.
2. Juridical persons(artificial Person) entities such as share company ,which are treated inlaw
as if they are person.
Legal liability:-Obligations under law arising from civil actions or under contract.
There are two kinds of legal liability
1.Limited Legal Liability
2.Unlimitted legal Liability
Business organizations
Business organization is any association arising out of parnership Agreements
I. Solopropritership
II. Any busniness organization other than a joint venture shall be deeemed to be a legal
person.there are six forms of business organisation under commercial code.
1. Joint Venture.
2. General Partnership.
3 . Limited Partneship
4. Private limited partnership.
5. Private Limited Public Company.(SC)
6.PrivateLimiteCompany.

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Create a New Company

File New Company

Part I. Company Information

 Choose a Peachtree product – Quantum

 Company Name: Roha General Trading PLC

 Address 1 : Bole S.City K. 11/12

 Address 2: HNo. 221

 City: A.A
 Country : Ethiopia

 Telephone: 011-5-50-80-80

 Fax:011-5-50-95-95

 Business Type: Private Limited Company

 E-mail- Roha@ethionet.com

Part II. Chart of Account

 Build your own chart of Account.

Part III. Accounting Method

 Accrual

Part IV. Posting Method

 Real time

PartV. Accounting Period

 Accounting period that do not match the Calendar month.

 Accounting periods in your fiscal year 12
 Start date of your fiscal year July 1, 2021.

I. Maintaining Chart of Accounts

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Step 1. From Maintain Menu Select Chart Of Accounts

Step 2. Enter the ID Eg 1010

Step 3. Enter Description Eg Cash On Hand

Step 4 .Select Account Type Eg. Cash

Step 5. Save

Account
ID Description Account Type
1010 Cash on Hand Cash
Account
1110 Account Receivable Receivable
Merchandise
1420 Inventory Inventory
2000 Account Payable Account Payable
Equity Doesn’t
3100-01 Paid up Capital Closed
4100 Sales Income
5100 Cost Of Goods Sold Cost Of Sales
Salary and Wage
6100-01 Expense Expenses

II. Importing Chart of Accounts from Excel to Peachtree Accounting

Step 1. From File Menu Select Import and Export

Step 2. Select General Ledger

Step 3. Select Chart of Accounts List

Step 4. Select Import Icon

Step 5. Go to Option Menu

Step 6.Click On Import /Export button

Step 7.Go to Desk top files ,Select CHAT.CVS

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Step 8.Select “Yes” in order to continue the process…OK

Chart of Accounts
Account ID Description Account Type
1010 Cash on Hand Cash
1020 Petty Cash Cash
1030 Revolving Fund Cash
1040 Cash At Lasta Bank Cash
1110 Accounts Receivable Accounts Receivable
1111 Allowance For Uncollectable Accounts Receivable
1120 Employees Advance Other Current Assets
1200-01 Owners Receivable Other Current Assets
1200-02 Debtors Staff Other Current Assets
1200-03 CPO Receivable Other Current Assets
1200-04 VAT Receivable Other Current Assets
1300 Prepaid Rent Other Current Assets
1400 Advance Profit Tax Other Current Assets
1410 Suspense Account Other Current Assets
1420 Merchandise Inventory Inventory
1500-01 Office Furniture Fixed Assets
Accumulated
1500-01-01 Accumulated-office Furniture Depreciation
1500-02 Computer Fixed Assets
Accumulated
1500-02-01 Accumulated Dep-Computer Depreciation
1500-03 Automobile Fixed Assets
Accumulated Dep - Accumulated
1500-03-01 Automobile Depreciation
2000 Accounts Payable Accounts Payable
Other Current
2100-01 Salary Payable Liabilities
Other Current
2100-02 Income Tax Payable Liabilities
2100-03 Pension Fund Payable Other Current

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 Liabilities
Other Current
2100-04 VAT Payable Liabilities
Other Current
2100-05 Withholding Tax Payable Liabilities
Other Current
2100-06 Cost Sharing Payable Liabilities
Other Current
2100-07 Profit Tax Payable Liabilities
Other Current
2100-08 Payable To Owner Liabilities
Other Current
2100-09 Credit Association Payable Liabilities
Other Current
2100-10 Cost Sharing Payable Liabilities
Other Current
2100-11 Annual Payble Liabilities
Other Current
2100-12 Dividend Tax Payable Liabilities
Other Current
2200 Loan Payable to Lasta Bank Liabilities
Other Current
2300 Accrued Payable Liabilities
Other Current
2400 Dividend Payable Liabilities
Equity-doesn’t
3100-01 Paid up Capital closed
Equity-Retained
3100-02 Retained Earning Earning
3100-03 Dividend Equity-gets closed
Equity-doesn’t
3100-04 Legal Reserve closed
4100 Sales Income
4100-01 Sales Return Income
4100-02 Sales Discount Income
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4100-03 Other Income Income
5100 Cost Of Goods Sold Cost of Sales
5110 Freight Charge Cost of Sales
6100-01 Salary and Wage Expense Expenses
6100-02 Transportation Allowance Expenses
6100-03 Medical and Related Exp. Expenses
6100-04 Representation Allowance Expenses
6100-05 Over Time Expenses Expenses
6100-06 Per dime Expense Expenses
6100-07 Commission Expense Expenses
6100-08 Audit Fee Expense Expenses
6100-09 Rent Expenses Expenses
6100-10 Bank Service charge Expenses
6100-11 Office Cleaning Expenses Expenses
6100-12 Office Supplies Expenses Expenses
6100-13 Fuel Expenses Expenses
6100-14 Loading Unloading expenses Expenses
6100-15 Miscellaneous Expenses Expenses
6100-16 Advertising Expenses Expenses
6100-17 Telephone Expenses Expenses
Water and Electric
6100-18 Expense(utility) Expenses
6100-19 Insurance Expense Expenses
Training & Education
6100-20 Expense Expenses
6100-21 Loading unloading Expenses Expenses
6100-22 Uniform Expense Expenses
6100-23 Entertainment Exp. Expenses
6100-24 Interest Expenses Expenses
Repair and Maintenance
6100-25 Expense Expenses
6100-26 Pension Fund Exp. Expenses
6100-27 License Renewal Expenses
6100-28 Dep. Exp-Office Furniture Expenses

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 6100-29 Dep. Exp-Computer Expenses
6100-30 Depreciation exp Automobile Expenses
6100-31 Amortization Expense Expenses
6100-32 Annual Leave Exposes Expenses

Maintain Stock Items

 Maintain  Default information  Inventory Items

Under G/c Acct /Costing

Item G/L Sales G/L Inventory G/L Cost Sales Costing

Class
Stock Item Select Sales A/c Select Inventory A/C Select Cost of Average
(4100) (1420) Sales (5100)

 G/L freight Account : Select Freight Charge (5110)

 Ok

Maintaining Master Stock Item

 Maintain Inventory Items

 Enter : - Item ID
-Description
 Select Item Class ; Stock Item

Save, Close.

Importing Data from Excel File to Peachtree Accounting

Part I. Changing Excel ordinary File to Command Files

Steps.
1. Open Excel File
2. Go to File Menu
3. Select save As Select Deskt top
4. File Name : ITEM

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 5. Save as Type : CSV (Comma Delimited)
6. Save,Yes
7. Close Excel File

Part II. Import data from Excel to Peachtree Accounting

Steps. 1. Go to Peachtree File menu & Select Import /Export

2. Select the report list which you want to Import

E.g. Inventory

3. Select sub report list from “ Import /Export” Inventory Item list
4. Click on “Import” Icon
5. Under” field “ tab select show none botton
Click on show check boxes columns which is already set up on Excel
Spread

Sheet Column Description.

E.g. Item ID 

 Item Description
6. Select “option” tab click on import /Export File continue botton
7. Select desk top
8. Select Excel file name “ ITEM” Open Ok
9. “ Would you like to continue” , When this command box appears select
“Yes”

If you want to check the imported item , Go to “Maintain” Menu select

Inventory Item, Click on list box

Item ID Item Description

AL-0253 Acer Laptop

AS-0260 Acer System Unit

AS-1500 APC Smart 1500 VA UPS

Canon-0002 Canon DADF P2

Canon-0140 Canon Fax L -140

Canon-0380 Canon Fax 0380

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CC-0100 Casion Cash Register TE-100

DC-2026 Dell Brand Computer with LCD

HP-4014 HP 4014 Printer

PP-0001 Pedestal

SV-0007 Sony VPL ES 7 Projector

TL-0002 Toshiba Laptop

Part III Importing customers from Excel file to peachtree accounting

software

- From Maintain menu Select default information ......... Cutomer

- Select GL Sales account from list boxes.....4100
- Select Sales discount account from the list boxes....4100-02
- Ok

Steps. 1. Go to Peachtree File menu & Select Import /Export

2. Select the report list which you want to Import

E.g. Customer
3. Select sub report list from “ Import /Export” Customer list
4. Click on “Import” Icon

5. Under” field “ tab select show none botton

Click on show check boxes columns which is already set up on Excel Spread

Sheet Column Description.

E.g. Customer ID

Customer Name 

6. Select “option” tab click on import /Export File continue botton

7. Select desk top

8. Select Excel file name “ CUSTOMER” Open Ok

9. “ Would you like to continue” , When this command box appears select
“Yes”

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 - If you want to check the imported item , Go to “Maintain” Menu select
Cuatomer and prospect, Click on list box.

Part III Importing vendors from Excel file to peachtree accounting

software

- From Maintain menu Select default information ......... Vendors

- Select GL Expense account from list boxes.....1420
- Select Discount GL account from the list boxes....5100
- Ok

Steps. 1. Go to Peachtree File menu & Select Import /Export

2. Select the report list which you want to Import

E.g. Vendors
3. Select sub report list from “ Import /Export” Vendor list
4. Click on “Import” Icon

5. Under” field “ tab select show none botton

Click on show check boxes columns which is already set up on Excel Spread

Sheet Column Description.

E.g. Vendor ID 

Vendor Name 

6. Select “option” tab click on import /Export File continue botton

7. Select desk top

8. Select Excel file name “ VENDOR” Open Ok

9. “ Would you like to continue” , When this command box appears select
“Yes”

- If you want to check the imported item , Go to “Maintain” Menu select

Vendors, Click on list box.

Chart of Accounts Description

Account ID Description Increasing Side Decreasing Side

1. …………. Asset …………. Debit …………. Credit

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 2. ………… Liability …………. Credit ………… Debit

3. ………… Capital …………. Credit …………. Debit

4. ………… Income …………. Credit …………. Debit

5. ………… Cost …………. Debit …………. Credit

6. ………… Expenses …………. Debit …………. Credit

Debit: always the Left side.

Credit: always the right side.
Balance Sheet Income Statement

Asset . . . . . . . . . . . . . . . . . . . . XX Sales . . . . . . . . . . . . . . . . . . . .. XX
Liability . . . . . . . . . . . . . . . . . . XX CGS ....................
(XX)
Capital . . . . . . . . . . . . . . . . . XX GP . . . . . . . . . . . . . . . . . . . . XX
Expenses . . . . . . . . . . . . . . . …. .
(XX)
NI/NL . . . . . . . . . . . . . . . XX

Asset
Any item (Tangible or Intangible) of economic value owned by an individual or
corporation.
1010 Cash on hand
These cash usually defined as monetary value of cash but not deposited to
the bank.
 Debit these account for

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-Cash collection from direct cash sales transaction , from credit customers or any
other source of cash before deposited to the bank.

 Credit these account for

-Deposited to the bank account

1020 Petty Cash

-It is a fund small amount of cash on hand used for paying small amounts
owed/purchase, rather than writing a check.
-There should be fund balnce whichis the amount of money kept by cashier for thus
purposes and fund limitation which is the amount bitt withdraw from the fund at
a time from a singl transaction.
 Debit these account for
-Establishment or increasing of petty cash fund.
 Credit these account for
-Decreasing of petty cash fund or closing book of records if it is necessary

1030 Revolving Fund

It is a fund established available to finance an organization’s continuing operation

for unidentifiable payment, hence the organization replenished the fund by over
paying money used from the account.

 Debit these account for

Establishment or increasing of the fund.
 Credit these account for

Decreasing of the fund or closing book of records if it is necessary

1040 Cash at Bank

The sum of all coins, currency and other unrestricted liquid funds that have been
placed on deposit with a financial institution.

 Debit these account for

When deposit occurred

 Credit these account for

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When payment occurred

1110 Account Receivable

Sales made but not paid by the customers (trade debtors), unsecured promises by
customers pay in the future. i.e. it comes from Credit Sales Invoice (CRSI)

 Debit these account for

Credit Sales occurs

 Credit these account for

Cash collection from credit customer or direct write off.

1111 Allowance for uncollectible

It is a contra Account Receivable account. The company anticipating that some

amount will be uncollectible in advance with legal documents.

 Debit these account for

When it becomes collectible

 Credit these account for

When uncollectible anticipation occurred

1120 Employees Advance

The amounts given to an employee with the expectation of repayments or purchase

of goods or services.

 Debit these account for

When the amount has given to employee

 Credit these account for

When advance cleared by employee or purchase occurred.

1200 – 01 Owner Receivable

The amount of money given to owners with expectation of repayments, it needs

written legal documents.
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  Debit these account for

When payment made to owners

 Credit these account for

When collection occurred from owners

1200 – 02 Debtors Staff The amount of money given to staff /employee for long-
term repayment. Under proclamation 377/96 any deduction from an employees the
organastion should collect only not excess of 1/3 of basic salary and also
the net pay should not be less than 1/3 of basic salry.

 Debit these account for

When money given to employees

 Credit these account for

When collection occurred for employee

1200 – 03 CPO Receivable

It is cash payment order or certified payment order to the bidder in order to check
suppliers capacity to supply goods or service, it is a pledge.

 Debit these account for

When the company pledge CPO

 Credit these account for

When the CPO returned and deposited to bank account

1200 – 04 VAT Receivable

It is a tax paid by buyer to purchase of goods or service

 Debit these account for

When the company pays for goods or services

 Credit these account for

When the company declared VAT to ERCA

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1300 Prepaid Rent

It is future expense that has been paid in advance; its value is expense over time as
the benefit is received.

 Debit these account for

When company payment made in advance

 Credit these account for

When the company consumed/used the prepared assets

1400 Advance Profit Tax

It is withholding tax, withhold by withholding Agents listed on ministry of finanace

directive 02/2111

 2% from local sales when the sales has TIN number and trade license
 30% who doesnt have TIN
 15% For forigners who gives technical supports
 3% from imported goods by customs Authority it will refund on annual profit
tax payment.
 Debit these account for

The buyer (withholding Agent) deducted from our sales of of goods or service and
give witholding receipt.

 Credit these account for

When profit tax is paid to ERCA.

1410 Suspense Account

It accounts that temporarily store any transactions for which there is uncertainty
about the account in which they should be recorded.

 Debit these account for

When the uncertain transaction is Debit

 Credit these account for

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When the uncertain transaction is Credit

1420 Merchandize Inventory

It referred to merchandize purchase by buyer for resell.

 Debit these account for

Purchase of those goods.

 Credit these account for

Sales of those goods.

1500-01/02/03 Fixed Assets

They are tangible assets held by an entity for the production or supply of goods and
services, for rentals to others, or for administrative purpose, expected to be used
for more than one accounting period and the amount should bengreater than 2,000
birr.

 Debit these account for

Acquisition/purchasing of fixed assets

 Credit these account for

Disposal, Sales , Damage of Fixed Assets.

1500-01/02/03 Accumulated Dep. – Fixed

Amount of depreciation for a fixed asset that has been charged to expense since
that asset was acquired and made available for use

 Debit these account for

Disposal, Sales, damage of fixed assets.

 Credit these account for

Closing of book of records, during depreciation calculation.

Liability

An obligation that legally binds an individual or company to settle a debt.

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2000Accounts payable

An entity’s short-term obligation to pay suppliers for products and services, which
the entity purchases on credit

 Debit these account for

Payment made for credit purchase transaction settled.

 Credit these account for

When purchase of goods or service on credit.

2100-01 Salary Payable

The amount of any services owed to employees, which have not yet been pad to
them, unclaimed salary.

 Debit these account for

When unclaimed salary paid to employee

 Credit these account for

When unpaid salary incurred

2100-02 Income Tax Payable

The amount of tax collected from employee according to income tax proclamation.

 Debit these account for

When the company paid the tax to ERCA

 Credit these account for

When the company preparing payroll to employee and withhold thus amount

2100-03 Pension Fund Payable

The total amount contributed by the company (11%)& employee(7%) to the

employees’ pension plane

 Debit these account for

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When the company paid pension contribution to ERCA

 Credit these account for

When the company preparing payroll to employee.

2100-04 VAT Payable

It is a tax collected by seller from sales of goods or services.

 Debit these account for

When VAT paid to tax authority

 Credit these account for

When credit/cash sales transaction

2100-05 Withholding Tax Payable

It is a tax collected by withholding agents. The amount of withholding tax as 2%

who has TIN and trade license or 30% who doesn’t have. The tax is collected from
the payment for service above 3,000 birr and for purchase 10,000.00 in a single
transaction.

 Debit these account for

Payment made for tax authority

 Credit these account for

When the payment made for purchase of goods and services

2100-06 Cost Sharing Payable

When the company preparing payroll to employee and withhold thus amount from
employees.

 Debit these account for

When the company paid the amount to ERCA .

 Credit these account for

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When the organization deduct the amount from employees in advance.

2100-07 Profit Tax Payable

It is a direct tax paid by tax payers to the government in the amount & the
procedure established by law.

 Debit these account for

When the tax paid to tax authority.

 Credit these account for

When the company earn profit.

2100-09 Payable to owner

A loan made to a company from owners that exchanges money for payments.

 Debit these account for

When the company pay the loan to share holders

 Credit these account for

When the company receives money from shareholders

2200 Loan Payable to Lasta Bank

The amount of loan received from the bank with interest in a certain period of time.

 Debit these account for

When the company pay the loan to the bank

Credit these account for

When the company receive Loan from the Bank

2300 Accrued Payable

These are Liabilities that reflect expense on the income statement that have not
been paid during an accounting period.

 Debit these account for

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When the invoice received and paid the expenses

 Credit these account for

When the company incurred obligation for goods and services provided to a
company for which invoice have not yet been received.

2400 Dividend Payable

The amount of money declared by a company’s board of director and which are
obligated to be paid to shareholders after tax.

 Debit these account for

When the company pay the dividend to shareholders.

 Credit these account for

When the company board of director declare the dividend.

Capital

It refers to financial resource available for use.

3100 – 01 Paid Up Capital

The amount of share capital paid by the shareholders.

 Debit these account for

When the company liquidate or the shareholders terminate from the company.

 Credit these account for

When the company sales its share to shareholders, accept new members or during
capital increament.

3100-02 – Retained Earning

It refers to the portion of net income of a corporation that is retained by the

corporation rather than distributed to shareholders as dividends

 Debit these account for

When the company incurred losses / non allowable expenses

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  Credit these account for

When the company get profit retained after tax amount

3100-03 – Dividend

A distribution of a portion of a company’s earnings, decided by the board of

directors,to a class of its shareholders.

 Debit these account for

When the dividend decleared by board of director

 Credit these account for

At the end of fiscal year, closed to retained earning

Revenue

It is an income that a company receives from its normal business activities usually
from the sales of goods & services to customers

4100 sales

The act of selling a product or service in return for money or other compensation on
credit or chash.

 Credit these account for

When thecompanysold goods or service on credit/cash

4100-01 sales return (refund)

When the goods or service returned by buyer to the seller in different reason.

NB not allowed by our tax law if only if there is a consent ERCA

 Debit these account for

When direct sales return occur

4100-02 Sales Discount .

It is an incentive to the seller offers in exchange for prompt payment on credit sales

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NB it is not allowable by ERCA after CRSI/CSI issue ,However it is allowable only
before invoice isissued.

4100-03 Other income

It is an income from activities other than normal business operation

 Credit these account for

When the company earns the income

5100- Cost of goods sold

It is the accumulated total of all costs used to create a product or service which has
been sold.

 Debit these account for

When sales of goods or service

5110 Freight charge

The cost incurred in moving goods

 Debit these account for

When payment is made for freight.

General and Administrative Expenses

The economic costs that a business incurs through its operations to earn revenue.
The tax payer has been allowed a deduction of expenditures for which the
expenses should be income driven and/or also associated with the existence/
continuity of business operation.

All expenses should full fill the followig either of the two criteras.

1.It shoud be supported by Receipts (R) and withold before payments as per 979/08
tax proclamation.

2.If it is a Non Receipt (NR) expenses it should be supported by type of FORMS to

explain the payments and tax paid on it or non taxable as per tax laws and
regulation.

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  Debit these account for

When the payment made to an expenses or incurred

 Credit these account for

When there is an adjustment

6100-01 salary /wage expenses

It is basic salary expenses paid to employees

6100-02 Transportation Allowance

It is travel expense which directly related to primary business in which the

individual works it is non taxabel when the organisation gives 25 % of basic salary
not greater 2210 birr to employees.It is also allowed 600 birr to all employees for
transport allowance. As per Ministry of finance directives 1/2111.

6100-03 Medical & related expenses

Any cost incurred in the prevention or treatment injure or disease for expense
employees

6100-04 Representation allowance

It is allowance give to employees who represent organization as a whose or
given to one employee who take over the responsibility of the absent
employees. TAXABLE if it is greater than 10% of Basic Salary.
6100-05 Overtime expense
Work performed by an employee or worker in excess of basic work day
Taxable

6100-06 Periderm expenses

A specified amount that employers will pay to employees will pay as
reimbursement for various expenses. The distance 25 km away from hiring
place
The Celling is 4 % basic salary,the floor is 3,000 birr per day for
breakfast,launch,dinner and bed for managements the Celling is 5 % basic
salary, the floor 1,000 birr per day . If the bed amount limitted or ulimited and

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 supported by receipt the perdiem should be 2.5% of basic Salay or 300
birr,for managements the Celling is 3 % basic salary, the floor is 600 birr per
day
6100-07 Commission expenses
A fee charged by a broker or agent for his/her service in a facilitating a
transaction
- More than 3,000 birr it should be withhold
6100-08 Audit Fee Expense
A fee a company pays an external auditor in exchange for performing an
audit
6100-09 Rent Expenses
The cost incurred by a business to utilize the office
6100-10 Bank Service Charge
Fees incurred by a company for the expenses associated with its checking
account transaction
6100-11 office cleaning expense
it is an expense incurred for cleaning purpose
6100-12 – Office supply expenses
A small item that is used within the office such as paper clips…..
6100-13 Fuel expenses
Expense used for vehicles or machinery to run business operation
6100-14 loading Unloading expenses
a cost incurred in moving goods
6100-15 Miscellaneousexpenses
A cost incurred in which the amount is very small
6100-16 Advertising expenses
It is a cost incurred for promotion of product or service
6100-17 Telephone Expense
Cost incurred for communication service, telephone, fax, internet ……
6100-18 Water & electrical expense ( Utility )
A cost consumed in reposting period
6100-19 Insurance Expense
The amount that is recorded for payment of insurance during an accounting
period
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6100-20 Training and Education Expenses
An organization has paid to employee for education service
6100-21 Car Running Expense
The cost associated with running a car
6100-22 Uniform Expense
It is a type of clothing work by members of an organization while participating
in that organization activities
6100-23 Entertainment Expenses
Costs incurred a in socialization associated directly with a business purpose
6100-24 Interest expenses
The cost incurred by an entity for borrowed fund
6100-25 Repair & Maintainance expense
The costs incurred to bring an asset back to earlier condition
6100-26 Pension Fund Expense
The company contribution pension fund for employees (11%)
6100-27 License Renewal
The cost incurred for renewal business license
6100-28 Depreciation Expense (28-30)
It is a non- cash expense that reduce the value of tangible asset over time

6100-31Amortization expense

The allocation to expenses of the cost of an intangible asset e.g. patent, good will

Definition Cash Receipt Voucher (CRV)

It is one of accounts technical documents which used to collect cash from credit
customers or any other sources such as loan, capital contribution, refund and so on.

Steps

1.From Task Menu Select “Receipt”

2. Select the pay customer from customer ID field or enter cutomer name in the
name field.

3. Write Reference enter CRV-No Writing as CRV-XXX

4. Write Receipt No. enter CRV # writing as CRV –XXX

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5. Select transaction Date.
6. Under “Apply to Revebue “ tab.
7. under GL Account field select Appropirate GL account credit and enter the
amount.

6. Check the journal entry and select save.

7. Write “Post” on CRV document

Definition Check Payment Voucher

A Check payment voucher (CPV) can be a method of payment for services or

goods. A CPV can also be like a type of receipt or recorded proof that a payment has
been made (just like a check stub).prepare before check is prepared.

CPV preparation Steps

(Cashier)

1. Analyze the payment document

2. Write the payment date.
3. Write the name of payee.
4. Write amount in figure and words.
5. Write description/reason of payment made.
6. Write check number and bank name.
7. Write prepared by name of the cashier and signature.

Put paid stamp on source document and write CPV no. and Date.

Definition: - Check

A negotiable instrument drawn against deposited funds, to pay a specified amount

of money to a specific person upon demand.

Check preparation Steps

8. Write the payment date.
9. Write the name of payee.
10.Write amount in words and figure close to the amount box.
11.Fill the check stub date, name, and reason amount of this ck.
12.Write CPV no in red pen on Check stab

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 26

(Accountant)

13.Check the CPV and check accordingly and Code the journal entry with red pen.

(Finance Head and General Manager)

14.Managers checked and approved the payments and make a signature

accordingly.

(Cashier)

15.Detach the CPV from its pad and supportive documents should attach with it
forward to accountants for posting.

Withholding Tax

Withholding tax is the current payments of income tax at time of goods imported
and payments made on account of goods and certain services.

Rates of withholding tax

On imported goods at 3% of the sum of cost, insurance and freight (CIF). On

payments made to taxpayers at 2% on cost of supply goods involving more than
Birr 10,000 in any one transaction or contract and services involving more than Birr
3,000 in one transaction or service.

In addition, a withholding agent who makes a payment to a person who has not
supplied a TIN (Taxpayer Identification Number) is required to withholding 30% of
the amount of the payment.

A taxpayer who has not supplied the TIN to the withholding agent, in addition to the
above 30% is liable to pay a fine of Birr 3,000.00 or the amount of the payment
whichever is less

1. Write the payment date.

2. Write the name of Tax Payer (Supplier/Vendor)
3. Write the TIN number and Tax Payer address.
4. Write the amount of good or service before tax.

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 27

 5. Write 2% withholding amount for those who have TIN if doesn’t have 30%.
6. Write the sales Invoice and check no.
7. Put signature and stamp of the withholding agent.
st
8. Distribution:-Original (Tax Payer)1 Copy(Accounts)2nd Copy(Tax Authority)3rd
Copy(Pad)

Check Payment Voucher (CPV ) Posting step

1.From the task menu select payment.

2. Write payee name ın the name field
3. Write CPV and Cheque no.
4.Select date of Payment from the calander.
- Write Description , select G/L account and enter the amount
- Write Description VAT Receivable, select G/L account and enter the amount (If
the payment has VAT)
- Write DescriptionWithholding tax payable, select G/L account, amount with (-)
negative sign (If the payment has Wiholding)
5. Check journal entry and coding and select ‘Save’

Petty Cash preparation Steps

(Cashier)

1. Analyze the payment document

2. Write the payment date.
3. Write the name of payee.
4. Write amount in figure and words.
5. Write description/reason of payment made
6. Write prepared by name of the cashier and signature.
7. Cashier fill petty cash sheet & detached.

Step to Replenish Petty Cash

Step 1. Cashier fill petty cash sheet & detached PCPV from its pad forward to
accountant.

Step 2. Accountant Code each PCPV, Open “T” account in order to collect identical
accounts & summarized those accounts.

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 28

Step 3. Accountant gives order to cashier to prepare CPV & check by replenished
amount in the name of cashier.

Step 4. Cashier Stamped “REPLANISHED” on both PCPV & its Supportive document
and write replenished CPV No & date on it.

Step 5. File copy petty cash sheet with PCPV & original petty cash sheet with CPV; file
those documents in separate box files.

Petty Cash Replenishment Posting Step

Step 1. From task menu select write checks.

Step 2. Enter payee Name, Check no & Date.

Step 3. Enter the replenished amount & write PCPV number in the memo field..

Step 4. Click on “Split”

Step 5. Select each account & enter the amount.

Step 6. Once amount replenish become zero select ok.

Step 7. Save.

Merchandise Inventory.

Definition: Merchandise inventory is goods that have been acquired by a

distributor, wholesaler, or retailer from suppliers, with the intent of selling the goods
to third parties. The transaction may occurred by Credit or Cash purchase.

Documentation for Cash Purchase of merchandise inventory

1. Preparation of payment (CPV,CK & Withholding )
2. Preparation of GRN
- Original GRN Stamp “ PAID” attach along with CPV
- Supplier CSI stamp “ PAID” attach along with CPV
- Copy GRN stamp “ PAID” write “for Memo” on it & File on GRN box file
3. Final documentation
CPV + Original GRN + Supplier CSI & Post in Peachtree accounting on ‘Payment’.
Steps for posting cash purchase of merchandize inventory

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1. From task menu select “Payment”
2. Select supplier ID/Vendor ID or Write supplier name in the name field
3. Enter Payment date , CPV/CK No and write GRN no in the ‘Memo’ field.
4. Under “Apply to Expense” tab enter quantity, item type & unit price of the
purchased item continue entering other items once you finished theitems,
Write Descreption VAT Recivable and select GL Account from the list(if it has VAT )
and Select Withholsing Tax Payable if there is witholding tax.
5. Check the Journal entry & then save
6. On CPV document write “Post”

Steps for posting credit purchase of merchandize inventory copy GRN

1. From task menu select “Purchases/Receive inventory”

2. Select supplier (Vendor) name from the list box
3. Enter transaction date & GRN number .
4. Donot enter any transaction on this window because there is no purchased
invoiced attached simply select ‘Save’
5. On GRN document write “Post”

Documentation for Credit Purchase of merchandize inventory

1. Preparation of GRN for the Item purchase
2. Original GRN to suppliers
3. Copy GRN & supplier CRSI attached and forward to accounts section.
4. Accountant’s post those document “Purchases/Receive inventory”& file.

Steps for posting Credit purchase of merchandize inventory GRN

1. From task menu select “Purchases/Receive inventory”

2. Select supplier (Vendor) name from the list box
3. Enter transaction date & GRN number .
4. Under “Apply to Purchase” tab enter quantity, item type & unit price of the
purchased item continue entering other items once you finished the items,
Write Descreption VAT Recivable and select GL Account from the list(if it has VAT )
5. Check the Journal entry & then save

6. On GRN document write “Post”

Bonus

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 30

 An extera paymenet (bonus payment) received for doing jobs well or a salary or
wages based completely on how well one does one jobs, called performance related
pay or pay for performance.
Usually there are two basic questions.

1. The amount of bonus payment ?

2. For which performance priod the bonus should be paid ?
Once we get this data the calculation shoud be like this

Zeleke 0-600 0.00 0.00

Belay 800.0
0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
600 -1,650 10.00 60.00
800.0 800.0 800.0 800.0 800.0 800.0 800.0 800.0 800.0
Gross salary 800.00 0 0 0 800.00 0 0 0 800.00 0 0 0 800.00
1,651 – 3,200 15.00 142.50
Bonus Payable 66.67 66.67 66.67 66.67 66.67 66.67 66.67 66.67 66.67 66.67 66.67 66.67 66.67

3,201 – 5,250
866.6 20.00
866.6 866.6 866.6 866.6 866.6 302.50 866.6 866.6 866.6
Taxable Income 866.67 7 7 7 866.67 7 7 7 866.67 7 7 7 866.67
Income Tax
Payable 5,251 – 7,800
26.67 26.67 25.00
26.67 26.67 26.67 26.67 26.67 26.67 565.00
26.67 26.67 26.67 26.67 26.67

Income Tax Paid 21.00 21.00 21.00 21.00 21.00 21.00 21.00 21.00 21.00 21.00 21.00 21.00 21.00
7,800- 10,900 30.00 955.00
Tax Difference 6.67 6.67 6.67 6.67 6.67 6.67 6.67 6.67 6.67 6.67 6.67 6.67 6.67

10,900> 60.0 35.00

60.0 1,500.00 721.0
Net Bonus 60.00 0 0 60.00 60.00 60.00 60.00 60.00 60.00 60.00 60.00 60.00 0

Severance Pay

- Analayize how many service year the employees give to the

organization it must be greater than five years.
- Take last gross salary in order to cacalulate severance pay amount.
- Give full months last salary for the first year ,for the remaining 1/3
of basic salary untile service year lasts.
- Once you get the total amount divid by last basic salary to get how
many months of severance payment which is not exceed 12
months.
- Calulate employees income tax for the last gross salary and
multiply by no of months for which the total severance payment
earned.

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 31

 - From total severance payment deduct total income tax to get net
severance payment.

Exampel
Sisay
Employee Name: Berhan
Hiring Date August 17, 2007
Terminated Date August 31, 2013
Last Gross Salary 2,000.00
2,000.
Basic Salary as of August,2013 00
Compensation:-
From Aug.17,2007 to Aug.16,2008 2100.00
From Aug.17,2008 to Aug.16,2013 (5years) 2100*5/3 3333.33
2100*15/365/
From Aug.17,2013 to Aug.31,2013 (15days) 3 27.40

z TOTAL COMPENSATION 5,360.73

Number of Months I/Tax to be Calculated =5,360.73/2,000.00=2.68 Months
I/Tax on 2100 (157.50*2) 315.00
I/Tax on 1,360.73 76.07
Total I/Tax 391.07
Net Compensation 4,969.66

5,360.7
Severance Expenses 3
Income Tax Payable 391.07
Cash At Lasta Bank 4,969.66
Sales
Definition:-Sales refers to a company’s revenue earned from the sales of goods or
service on credit (CRSI) or on Cash(CSI).

Setting up of VAT

1. Maintain Sales Tax

2. Select Set up a new Sales tax Next
3. Enter the total rate that you will charge e.g. 15%
 Enter 1 to use individual rates Next
4. Enter Sales Tax Agency

Sales tax Agent I.D

e.g. ERCA A.A
 Sales tax Agent name
e.g. ERCA Western A.A Branch

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 32

  Vendor you send the taxes you have collected to click on this
field
Select New
 Vendor I.D: ERCA Western A.A
 Vendor Name: ERCA Western A.A Branch
 Under expense Account select ; VAT Payable Acct
 Save , Close
 Select ERCA Western A.A
 Sales taxes calculation enter by Single rate
 Rate : e.g. 15%
 Select VAT Payable Account from the account to track sales taxes
field.
e.g. 2100-04 VAT Payable Next

5. Enter Sales tax I.D e.g. VAT

 Enter tax Name : value Added Tax

 Don’t use Sales tax on freight Finish

Steps for posting Credit Sales of merchandize inventory

1. From task menu select “Sales/Invoice”
2. Select supplier (Customer) name from the list box
3. Enter transaction date &CRSI number.
4. Under “Apply to Sales” tab enter quantity, item type & unit price of the sold
item, continue entering other items once you finished the items and select Sales
tax VAT from the sales tax feild if it is not selected before.
5. Check the Journal entry & select Save.
6. On CRSI document write “Post”

Posting Steps for Cash Sales

1. From task menu select “Receipt”

2. Write Reference enter CSI-No Writing as CSI-XXX

3. Write Receipt No. enter FS-No writing as FS-XXX

4. Select sales transaction Date.
5. Under Name enter the name of the ‘Buyer’

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 33

6. Under “Apply to Revenue” tab enter quantity, item type & unit price of the
purchased item continue entering other items once you finished the items,
Write Descreption Advance Profit Tax (Witholding) and select GL Account from the
list(if it has WITHOLDING ) and Select Tax Exempted from tax field and enter the
amount in negative value.
7. Select Sales tax VAT from the sales tax feild if it is not selected before.
8. Check the Journal entry & then save
9. On CSI document write “Post”

Posting Step to Deposit

1. From task menu select “Select for Deposit”

2. Select the Bank account.
3. Under deposit ticket Id field write “Month/Date”

4. Select deposit check boxes next to each receipt deposited and once the total
deposit slip amount equal to the collected cash on that date select Save.
When we buy goods and service on account (crdit) usually payment made after
credit purchase transaction occured . In order to settle your debts you should follow
the following steps.

Documentation for Settlement of Credit Purchase Transaction

Steps

1. Receive Original GRN from Suppliers and prepare CPV ,If the payment is full and
above 10,000 you should withhold. If the payment is partial and the transaction
before occurs is above 10,000 you should withhold from the first or the last
payment.3

3.Coding Accounts Payable ……………………..Dr.

Withholding Tax Payable (If there is)……….Cr.

Cash at Bank …………………………………. Cr

2. After payment receive CRV from supplier.

3. Documentation:- CPV + Original GRN and Supplier CRV and file.

Date Credit Purchase Payment Amount

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 34
 Request GRN
28/05/
21 Fully TO ECAS 143,284.00
28/05/
21 Partially TO Tropical 83,000.00

Posting for Settlement of Credit Purchase Transaction

Steps

1. From Task Menu Select Payment.

2. Select Vendor ID from the vendor list Box.

3. Wrie CPV and Check number and payment date.

4. Under “Apply to Invoice” Tab

- Select the paid GRN from the list and select Pay Check Box (Fully) or enter the
amount manually (Partialy) in the amount field.

- If there is withholding tax go to “Apply to Expenses” Tab Select Withholding

Tax Payable from GL Account Field enter the amount in negative value under
amount field.

7. Check the Journal entry select Save.

8. Write “Post” on CPV Document.

Collection from Credit sales transaction

When we sold an Items goods or service on credit and later the customers pays
their outstanding balance you should collect by Cash Receipt Voucher (CRV) and
give th orginal CRV to customers and copy to Accountant.

Custom Cash collection from credit customer by

Date er CRV Amount

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 35

29/05/
21 Hunter CRSI # 005 Fully 52,486.00
29/05/
21 Loyal CRSI # 005 Partially 15,500.00
Accountant post CRV by the following steps in Peachtree accounting

Steps

1.From Task Menu Select “Receipt”

2. Select the pay customer from customer ID field.

3. Under “Apply to Invoice “ tab select Credit Sales Invoice(CRSI)

4. Select the Pay check box (Fully)or enter the amount manually (Partialy) on the
amount field.

5. If there is Withholding Agent Withhold and pay the amount go to “Apply to

Revenue” tab and under GL Account field select Advance profit tax account and
enter the amount.

6. Check the journal entry and Coding select save.

7. Write “Post” on CRV document

Merchandise Transaction Summery

Credit Sales transaction Post In Peachtree

Account Description Debit Credit
Account Receivable XXXX Sales/Invoicing
VAT Payable XXXX
Sales XXXX
Cost of Goods Sold XXXX
Inventory XXXX

Credit Purchase Transaction

Account Description Debit Credit Purchase/Receive

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 36

Merchandise Inventory XXXX Inventory
VAT Receivable XXXX
Accounts Payable XXXX

Direct Cash Sales Transaction

Account Description Debit Credit Receipt
Cash At Bank XXXX "Apply to Revenue"
Advance Profit Tax XXXX
VAT Payable XXXX
Sales XXXX
Cost of Goods Sold XXXX
Inventory XXXX
Direct Cash Purchase Transaction
Account Description Debit Credit Payment
Merchandise Inventory XXXX "Apply to Expense"
VAT Receivable XXXX
Withholding Tax Payable XXXX
Cash At Bank XXXX

Cash Collection From Credit Customers (Partial) Receipt

Account Description Debit Credit "Apply to Invoice"
Cash At Bank XXXX
Account Receivable XXXX
Payment made for credit purchase Transaction( Partial)
Account Description Debit Credit Payment
Account Payable XXXX "Apply to Invoice"
Cash At Bank XXXX

Cash Collection From Credit Customers (Fully) Receipt

Account Description Debit Credit "Apply to Invoice"
Cash At Bank XXXX &
Advance Profit Tax XXXX "Apply to Revenue"
Account Receivable XXXX
Payment made for credit purchase Transaction( Fully)
VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 37
Account Description Debit Credit Payment
Account Payable XXXX "Apply to Invoice"
Withholding Tax Payable XXXX &
Cash At Bank XXXX "Apply to Expense"
Payroll Set Up

Part I. Income Tax

 File  Payroll Formulas User Maintained

 Formula ID: ETHIO 21
 Name: ETHIO 21
 Effected on Gross Pay: Subtracts from Gross
 Filling Status : All
 Classification of formula :Tax
 Tax Agency : Federal
 Formula: ANSWER =-TABLE(ADJUSTED_GROSS)
 Click on Set up Tax Brackets
If taxable income is Withhold Plus
over
600.00 00 10
1,650.00 105.00 15
3,200.00 337.50 20
5,250.00 747.50 25
7,800.00 1,385.00 30
10,900.00 2,315.00 35

 Ok
 Save , New

Part II. Pension Fund

7% (Employee)

 Formula ID; PANEE 21

 Name: PANEE 21
 Effect on Gross Pay: Subtract from Gross
VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 38
  Filling Status: All
 Classification of formula : Tax
 Tax Agency : Federal
 Formula : ANSWER =-7%*(ADJUSTED _GROSS)
 Save, New

11% (Employeer)

 Formula ID: PANER 21

 NAME : PANER 21
 Effect on Gross Pay : Subtract from Gross
 Filling Status : All
 Classification of Formula : Tax
 Tax Agency : Federal
 Formula : ANSWER =-11%*(ADJUSTED _GROSS)
 Save , New

Part III. Credit Association

 Formula ID: CREDIT21

 Name : CREDIT 21
 Classify Formula : Deduction
 Effect on Gross Pay : Subtract from gross
 Filling Status : All
 Formula : ANSWER=-10%*(ADJUSTED_GROSS)
 Save , New

Part IV. Cost Sharing

 Formula ID: COST21

 Name : COST 21
 Classify Formula : Deduction
 Effect on Gross Pay : Subtract from gross
 Filling Status : All
 Formula : ANSWER=-10%*(ADJUSTED_GROSS)
 Save , New

Part V. Entering Total Earning

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 39

  Formula ID: ADDIT 21
 Name : ADDIT 21
 Classification of Formula : Benefit
 Effect on Gross Pay : Add to Gross
 Filling Status: All
 Formula : ANSWER=(ADJUSTED _ GROSS)
 Save, New

Part VI. Entering Total Deduction

 Formula ID: DEDUC 21

 Name : DEDUC 21
 Classification of Formula : Deduction
 Effect on Gross Pay : Subtract from Gross
 Filling Status : All
 Formula ; ANSWER=(ADJUSTED _GROSS)
 Save
 Click on Next step to add those formulas to Employee defaults.
 Select “Yes” if you like to open the payroll set up wizard now
 Click on Next
 Select Do it yourself in house option  Next
 Select Do it yourself optionNextNextSelect State A.A 
NextUnder pay type option Select Salary
 G/L Account No. Select Salary expenseNext
 Under Benefits your Company offers, Don’t check any benefit options 
Next
 Under tax Liability Account no. Select Income Tax Payable
 Under Tax Expense Account no. Select Pension Fund Expense
 Next  Finish

Entering Employees Default information

 Maintain Default Information Employees

Raw 1.

 Under Employee Field

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 40

  Field name : Enter Income_Tax
 G/L Account : Select Income Tax Payable
 Calculate :  Checked
 Formula : ETHIO

Raw 2.

 Field Name : Pension_EE

 G/L Account : Select Pension Fund Payable
 Calculate :  Checked
 Formula : PANEE

Raw 3.

 Field Name: Trans_NonTax

 G/L Account: Select Transport Allowance
 Calculate : Unchecked

Raw 4.

 Field Name: Advance_EE

 G/L Account : Select Employees Advance
 Calculate : Unchecked

Raw 5.

 Field Name: OT
 G/L Account : Select Over Time Expense Account
 Calculate : Unchecked
 Go to Income Tax field
 Click on Adjust continue Button
 Checked use option in the OT field  OT
 Ok.

Raw 6.

 Field Name: Other_Ded

 G/L Account : Select Suspense Account
 Calculate : Unchecked

Raw 7.

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 41

  Field Name: Trans_Tax
 G/L Account : Select Transportation allowance Account
 Calculate : Unchecked
 Go to Income Tax field
 Click on Adjust continue Button
 Checked Trans_Tax Field
 Ok.

Raw 8.

 Field Name: Cost_Sharing

 G/L Account : Select Cost Sharing Payable Account e.g 2100-10
 Calculate: Checked
 Formula: COST

Raw 9.

 Field Name: : Credit _ Loan

 G/L Account : Select Credit Association Payable e.g 2100-09

Raw 10.

 Field Name: Credit_ Saving

 G/L A/C; Select Credit Association Payable e.g 2100-09
 Calculate: Checked
 Formula: CREDIT

Raw 11.

 Field Name: TTL_Earning

 Calculate :  Checked
 Formula : ADDIT
 Memo:  Checked
 Click on Continue Button :
 Checked the “Use” option in order to get the subtotal .
E.g. Gross  , Trans –Allow  , OT , Trans – Tax and
any other additional field.
 Ok.

Raw 12.

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 42

  Field Name : TTL_ Deduction
 Calculate :  Checked
 Formula : DEDUC
 Memo:  Checked
 Click on Continue Button
 Checked the “Use” option in order to get the subtotal.
 E.g. Income Tax  , Pension
 ,Advance , Cost_Sharing
,
  

Credit_Loan , Credit _ Saving and other deduction

 Ok.

Raw 13.

 Field Name: Signature

 Memo:  Checked

 Under Company Field tab
 Field name: Pension _ER
 Liability : Select Pension Fund Payable
 Expense: Select Pension Fund Expense
 Calculate :  Checked
 Formula : PANER
 Delete other Rows
 Ok
 Ok

Maintain Employees

 Maintain Employees/Sales Rep.

 Employee ID:HIWOT
 Name; Hiwot Ayalew
 Go to pay info:
- Pay method: Salary
- Pay frequency; Monthly
- Salary Rate: Enter Gross Salary
 Go to Employee Field

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 43

  Unchecked Trans_ Non Tax and enter the amounts.
 Unchecked Trans_Tax and enter the amounts.
 Enter Other Information in Employee Fields.
 Save & New, Continue other Employee till you finished

N.B:Consider that Pension Fund Contribution is deductable only for permant

employees , means employee who works more than 45 days.

Payroll Set Up

 Steps to design payroll Net Pay

 Go to task menu
-Select for payroll Entry
-Enter Pay end Date
-Ok.
- Close.
 “Do you want to print these check “, when this command box appears
Select “Yes”.
 Enter payroll Check No. E.g CPV 002156/2156
 Select print in order to get payroll slip for each Employees.
 When the command Box ask “Did the checks print properly, and is it
ok to assign check numbers to the checks Select “Yes”.

 Task Payroll entry

 Select list, Select each employees & adjust check no by payroll
Cheque No.
 Save,
Design Net Pay Report
 Go to report menu.
 Select payroll.
 Double Click Payroll register.
 Select Column Icon in order to adjust column order.
 Show column select “None”.
 Select show check boxes the necessary column in order to appear in
the Net Pay report, adjust column position by selecting move up or
move down under columns order list.
 Ok.
VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 44
  Select Save.
 Report name : Net Pay , Save
Bank Reconciliation

A company's cash balance at bank and its cash balance according to its accounting
records usually do not match. This is due to the fact that, at any particular date,
checks may be outstanding; deposits may be in transit to the bank, errors may have
occurred etc. Therefore companies have to carry out bank reconciliation process
which prepares a statement accounting for the difference between the cash balance
in company's cash account and the cash balance according to its bank statement.

 Deposits in Transit: Deposits which have been sent by the company to the bank
but have not been received by the bank at proper time before the issuance of bank
statement.
 Checks Outstanding: Checks which have been issued by the company but were
not presented or cleared before the issuance of bank statement.

Steps to reconcile Bank Account

1. From Task Menu Select “Account Reconciliation”

2. Select the Bank Account from the Account to reconcile List Boxes.

3. Select the statement Date.

4. Write the statement ending balance from bank statement.

5.Select the clear check Box from status field next to each amount that is included
in the bank statement both deposit /Bank Credit and check and Bank debit.

6. Analyze the unclear amount found in the bank statement but not found in the
record or vice versa

Or any error made by Bank or Company record.

7. Adjust any error found, by selecting adjust icon and pass the necessary journal
entry.

8.Once reconcile balance become zero select “OK” Icon

Steps to print Bank Reconcilation

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 45
1. From Report/Form Menu bar Select “ Account Reconciliation”
2. Select Account Reconciliation
3. Order Print and file with Bank Statement
.

General Journal Voucher (JV)

 Analyzing:-
.
- Used as daily, monthly, quarterly or annually depending on the users
needs and rqurements.
- JV uses usually like prepaid assets, accrual, deferral, depreciation and so
on
 Documentation:-
- JV
 Coding
Example on prepaid assets
Prepaid Expense ………Dr
Prepaid Asset …………….Cr
 Posting
- General Journal
1. From task menu select General Journal.
2. Enter Date and JV number.
3. Select GL account from the list boxes ,write the desception of
transaction , enter the amount continue both Debit and Credit balance
balanced.
4. Save

 Financial Statement
- It affects both Balance Sheet and Income Statement Accounts

Decleration
Income Tax Declaration

 Analyzing:-
- Fill ERCA income tax declaration form payroll net pay slip
- Check the trail balance of income tax payable balance with ERCA form
- Deposit ERCA bank Account
- Prepare CPV
- Pay to Tax authority
 Documentation:-

CPV

File CPV+DEPOSIT SLIP+ERCA RECIPT+DECLERATTION FORM

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 46

  Coding:-

Income Tax Payable……. Dr

Bank service Charge…. Dr

Cash at Bank ………………….. Cr

 Financial Statement

It affects both Balance Sheet and Income Statement Accounts

Pension Fund Declaration

 Analyzing:-
- Fill ERCA Pension Fund declaration form payroll net pay slip
- Check the trail balance of Pension Fund payable balance with ERCA form
- Deposit ERCA bank Account
- Prepare CPV
- Pay to Tax authority
 Documentation:-

CPV

File CPV++DEPOSIT SLIP +ERCA RECIPT+DECLERATTION FORM

 Coding:-

Pension Fund Payable……. Dr

Bank service Charge……… Dr

Cash at Bank ………………….. Cr

 Financial Statement

It affects both Balance Sheet and Income Statement Accounts

-Withholding Tax Declaration

 Analyzing:-
- Collect copy withholding tax receipt of the month.
- Fill ERCA withholding tax declaration form receipt
- Check the trail balance of withholding tax balance with ERCA form
- Deposit ERCA bank Account
- Prepare CPV
- Pay to Tax authority

 Documentation:-

CPV
VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 47
File CPV++DEPOSIT SLIP +ERCA RECIPT+DECLERATTION FORM

 Coding:-

Withholding tax Payable……. Dr

Bank service Charge…………... Dr

Cash at Bank ………………….. Cr

 Financial Statement

It affects both Balance Sheet and Income Statement Accounts

VAT Declaration

Case 1

Month 1

VAT Payabel .............12,0000 [10]

VAT Recivabel .......... 12,0000 [ 170]

VAT payabele is equal to VAT reveivabel..................Nill Report

VAT Payabel ..............12,000

VAT Receivabel ........ 12,0000.

Case 2

Month 1

VAT Payabel .............10,0000 [10]

VAT Recivabel .......... 8,0000 [170]

VAT payabele is greater than VAT reveivabel..................Prepare Payments

VAT Payabel ..............10,000

VAT Receivabel ........ 8,0000.

Cash at Bank .............2,0000 [200]

Case 3

VAT Payabel ............ 12,0000 [10]

VAT Recivabel .......... 16,0000 [170]

VAT Reveivabel is greater thanVAT Payabele.................. VAT Credit (Refund) [205]

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 48

VAT Payabel ..............12,000

VAT Receivabel ........ 12,0000.

Note
4,000 Birr VAT Recivabel Balance carrying forward to the next month Month 2

Case 4

There is abegining balance of VAT Reveivabele from month 1 is 4,000 [195]

Month 2 information as follows

VAT Payabel .............21,0000 [10]

VAT Recivabel ..........15,0000 [170]

VAT payabele is greater than VAT reveivabel..................Prepare Payments

Amount of payment

VAT payabele Month 2 .................... 21,0000 [10]

VAT Recivabel of Month 2................ (15,0000) [170]

Net Vat Paybel of Month 2.................. 5,0000 [185]

Balance from Month 1 .......................... (4,000) [195]

Net Pay of the Month 2....................... 1,0000 [200]

VAT Payabel ..............21,0000

VAT Receivabel ........ 19,000

Cash at Bank .............1,0000

Case 5

There is abegining balance of VAT Reveivabele from month 1 is 4,000 [195]

Month 2 information as follows

VAT Payabel .............18,0000 [10]

VAT Recivabel ..........16,0000 [170]

VAT payabele is greater than VAT reveivabel..................Prepare Payments

Amount of payment

VAT payabele Month 2 .................... 18,0000 [10]

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 49

 VAT Recivabel of Month 2................ (16,0000) [170]

Net Vat Paybel of Month 2.................. 2,0000 [185]

Balance from Month 1 .......................... (4,000) [195]

Balance forward to Month 3............... 2,0000 [205]

VAT Payabel ..............18,0000

VAT Receivabel ........ 18,000

 Analyzing:-
-Collect VAT receipt from CPV, PCPV and GRN of the month.
-Fill VAT receipt on Purchase summery sheet
-Fill ERCA VAT declaration form
-Check the trail balance of VAT Receivable and VAT Payable balance with
ERCA form
- Deposit ERCA bank Account (i.e. VAT Payable would be greater than from
VAT receivable)
- Prepare CPV
- Pay to or Declare to Tax authority
 Documentation:-

CPV or JV

File CPV++DEPOSIT SLIP +ERCA RECIPT+DECLERATTION FORM OR

JV+ DECLERATTION FORM

 Coding:-
FOR CPV FOR JV

VAT Payable……. Dr VAT Payable……. Dr

Bank service Charge…………... Dr VAT

Receivable………………. Cr

Cash at Bank ………………….. Cr

VAT Receivable………………. Cr

Financial StatementFinancial Statement ........................... Only Balance Sheet

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 50

 Trial Balance Checking User Guide

F/s or related Accounts Affects

Coding and Posting ( Balance sheet
N Analyzing Documentation (Posting in Peachtree or Income statement S
(Mostly Affected) (Sometimes
o (Types Of Accounts) Affected) Accounting ) Account)

Receipt, Payment, GJ, Cust

CSI,CRV, Select for payroll entry In
1 Cash Accounts CPV,PCPV JV Account Reconciliation Both

Account Receivable, Cash

Advance profit Tax, Sales,
Vat Payable, C
2 Account Receivable CRV,CRSI Receipt and Sales/ Invoicing, CGS, Inventory
Debtors’ Staff ,CPO Cash, WTP, VAT Receivable ,Debtors’ Staff
Receivable CPV,PCPV Receipt and Payment, GJ, ,CPO Receivable
3 Prepaid Rent ,CRV,JV Select for Payroll entry Prepaid Rent, and Prepaid Assets

CPV , Cash, Sales, VAT Payable ,CGS, Inventory,

4 Advance Profit Tax CSI, CRV PCPV,JV Receipt, Payment, GJ A/R Cus
CPV,PCPV, Payment and
5 VAT Receivable JV,GRN Purchase/Receive Inventory, GJ Asset and Expense Accounts Ve

Payment, Inventory Adjustment

CSI,CRSI, Purchase/Receive Inventory,
6 Merchandise Inventory CPV,GRN,JV Receipt and Sales/ Invoicing, Inventory and CGS
Cash, Loan Payable, Withholding Tax
CPV,CRV Payment , Receipt, General Payable, VAT
7 Fixed Assets ,CSI,JV Journal Receivable

Payment and V
8 Accounts Payable CPV,GRN Purchase/Receive Inventory Inventory, VAT Receivable and CGS
9 Income Tax Payable, Pension CPV, PCPV Payments and
Fund ,JV Select for payroll Entry ,GJ Payroll related Accounts

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 51

 Payable, Credit association
and Cost sharing Payable

Trial Balance Checking User Guide

F/s or related Accounts Affects

Documentation Coding and Posting ( Balance sheet
Analyzing (Directly Affected) (Posting in Peachtree or Income statement
(Types Of Accounts) (Indirectly Affected) Accounting ) Account)

Receipt and Sales/ Invoicing Cash,Sales,VAT Paybel,CGS,Inventory ,

10 VAT Payable CSI,CRSI JV,CPV,PCPV Payment,GJ Advance profit Tax

Cash and withholding

11 Withoding Tax Payable CPV PCPV Payment Tax Paybel,Advance Profit Tax

12 Paid Up Capital CRV,CPV JV Receipt ,Payment, GJ Capital Accounts

13 Sales CSI,CRSI CPV,PCPV Receipt and Sales/ Invoicing Cash,Sales,VAT Paybel,CGS,Inventory

14 Cost of Goods Sold Payment ,

CSI,CRSI, Purchase/Receive Inventory,

CPV,GRN,JV Receipt and Sales/ Invoicing Inventory and CGS

CPV,PCPV Select for Payroll

15 Salary and Related Expenses ,CRV,JV Entry,Payment,GJ, Salary Related accounts

CPV , PCPV
16 All Expenses ,JV Payment and General Journal All Expense Accounts,Cash,Prepaid Assets

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VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 53
Closing Procedure | Closing Entries
Closing periods are very common in accounting departments. The closing
process happens at least once a year, and it’s a time when accountants are
very busy clearing up issues, conducting reconciliations and correcting
errors. Many accounting departments have specific procedures, including
checklists and timelines, to make sure all transactions are performed and
nothing falls through the cracks.

Year-end closing checklist

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 54

  Accruals
A common task before closing a period is to search for accrued expenses,
which are expenses that have occurred, but haven't yet been paid.
Accountants look over bills received after the closing day to determine if
they should be accrued in the prior period. To be accrued, a transaction is
recognized as an expense when it occurs, not when it is paid. Common
accruals are utilities expenses, which are paid after services are provided.
Many times, accountants review the prior-period accruals to get ideas on
specific expenses that are accrued regularly. The journal entry to
recognize an accrued expense is to debit (increase) the appropriate
expense account, such as a utilities expense account, and to credit
(increase) a payable.

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 55

 Illustration Journal Entries

Debit Credit
Salary Expense xxx.xx
Salary Payable xxx.xx
Income Tax Payable xxx.xx

Debit Credit
Annual Leave Expense xxx.xx
Annual Leave Payable xxx.xx

 Depreciation
Usually, depreciation expenses are recognized just before closing entries
are done. The idea is to spread the costs of fixed assets through various
periods. For example, you may have purchased a 100,000 piece of
equipment a few years ago, but instead of expensing all costs in one year,
it can be depreciated over 5 years at a rate of 20,000 per year. This is
accomplished through journal entries that increase depreciation expense
and the allowance for depreciation, which reports in the balance sheet.
These entries also happen in fully computerized systems that maintain
fixed assets, perform all depreciation calculations automatically and post
journal entries -- a major time-saver in this process.

IN ETHIOPIAN CONTEXT, INCOME TAX PROCLAMATION 979/2108,

REGULATION SECTION IV, 39

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 56

Article 39
1. The rate of depreciation applicable assets are specified in the following table based on the
following categories.

Diminishi
Straight- ng
line Value
Depreciable Assets Rate Rate
Computer, software ,and data storage
equipment 20% 25%

Greenhouses 10% -
Structural improvement other than a
green House 5% -
Any other depreciable assets 15% 21%
Depreciable Assets used in mining and
petroleum 25% 30%
development operation
2/ The rate of depreciation applicable to a business intangible shall be

a) For preliminary expeniture,25%.

b) For a business intangible with a usedul life of more than 10years,other

than abusiness intangible referred to in pragraph (a) 10% or

c) For any other busines intangible, 100% divided by the useful life of
intangible.

3/In this Article” preliminary expeniture” means expenditure referred to in

the paragraph (4) of the definiton of “business intangible” I Article 25(7)
(a)bof proclamation incurred by a taxpayer bfore the commencement of a
business.

40.Deperciation allowed on a building used partially as a Business

Asset

Depreciation on a building used prtially as a business asset shall be allowed

only in proportion to the portion of the propety used as a businss assets.

41.Repairs and Improvements

1/subject to sub-article (2) of this Article, a taxpayer shall be allowed a

deduction for a tax year for the cost of repair or improvement made to
deprciable asset during the year.

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2/The amount of the deduction allowed under sub- article (1) of this Article
shall not execced 20% of the net book value of the asset at the end of the
tax year.

3/ If the cost of a repair or improvement made to a depreciable asset during

the year exceeds 20% of the net book value of the asset, the whole cost of
repair or improvement shllbe added to the net book value of the asset.

Illustration Journal Entries

Debit Credit
Depreciation Expense xx,xxx
Accumulated Depreciation xx,xxx

 Reconciliations
Many businesses put the reconciliations on top of their closing checklists.
Usually, all balance sheet accounts, such as cash and fixed assets, are
reconciled before the period is closed. Accounts receivable and payable
modules are reconciled to the numbers in the general ledger. For
example, when you see 100 as a balance in the accounts payable, this
number should also be the balance in the accounts payable aging report,
which is generated by the payable module. Cash accounts are reconciled
to bank monthly statements. The point of performing reconciliations is to
ensure that the period to be closed contains accurate, reliable numbers.

 Tax Credit
In our country as per council of Ministers Income tax Regulation no. 401/2108, Part
6, section24

Withholding Scheme

Organizations having legal personality, private non-profit originations shall,

pursuant to Article 53(2) of the proclamation, withholding income tax of 2 % from
payments they make to tax payers providing the following goods and services.

1. Supplying of goods involving more than Birr 10,000 in one transaction or one
supply contract;

2. Rendering of the following services involving more than Birr 3000 in one
transaction or one service contract.

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 58

Usually in merchandise business type when sales transaction greater than 10,000
occurred organizationsdeduct 2% while they pay, those tax named Advance profit
tax (withholding tax receivables get summarizes and totaled) at the end of fiscal
year and deduct from profit tax payable amount.

Illustration

Sales……………………….600,000

CGS……………………….(400,000)

G.P………………………...210,000

G&A Expenses……………(100,000)

NI ………………………...100,000

30% Profit tax…………….(30,000)

NIAT………………………70,000

Profit Tax Statement

30% Profit tax……………..30,000

Less: Advance Profit Tax….(9,000)

Net Profit Tax Payable……21,000

Illustration Journal Entries

Debit Credit
Net Income 100,000
Advance Profit Tax(WTHR) 9,000
Retain Earning 70,000
Profit Tax Payble 21,000

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 59

  Legal Reserve
In corporate level or private limited company after deducting profit tax from net
income organizations should retained legal reserve before declaring dividend to
shareholders as per letter of memorandum and association articles.

Profit Tax Statement

Net income…………………100,000

30% Profit tax……………..(30,000)

Profit After Tax ………… 70,000

Legal Reserve 5 % PAT …(3,500)

Debit Credit
Retained earning 3,500
Legal Reserve 3,500

 Dividend Tax
When the organizations declared dividend s after deducting legal reserve, it has to
be 10% dividend tax calculated before distributing to share holders.

Profit Tax Statement

Net income…………………100,000

30% Profit tax……………..(30,000)

Profit After Tax ………… 70,000

Legal reserve 5 % PAT …(3,500)

Dividend Declared………..66,500

Less:-Dividend Tax 10 %...(6,650)

Dividend Payable……….. 59,850

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 60

 Illustration Journal Entries

Debit Credit
Dividend 66,500
Dividend Tax Payable 6,650
Dividend Payable 59,850

 Closing Entries
All accounts showing up in the income statement, such as revenues and
expenses, are zeroed out during closing, and balances are transferred to
a summary account. To zero out revenues, you debit them and credit the
summary account. To zero out expenses, you credit them and debit the
summary account. The next step is to close the summary account and
transfer its balance to the equity account. Dividends are closed directly
into equity, bypassing the summary account step. This entire process is
easily performed by computerized systems, which may not use summary
accounts. The idea is to transfer income and expenses to the balance
sheet through equity, while leaving these accounts ready to accumulate
information for the next period.

Closing Entries | Closing Procedure

Closing entries are journal entries used to flush out all temporary accounts at
the end of an accounting period and transfer their balances into permanent
accounts. Doing so resets the temporary accounts to begin accumulating
new transactions in the next accounting period. The basic sequence of
entries is:

1. Debit all revenue accounts and credit the income summary account,
thereby clearing out the revenue accounts.
2. Credit all expense accounts and debit the income summary account,
thereby clearing out all expense accounts.
3. Close the income summary account to the retained earnings account.
If there was a profit in the period, then this entry is a debit to the
income summary account and a credit to the retained earnings
account. If there was a loss in the period, then this entry is a credit to
the income summary account and a debit to the retained earnings
account.

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 61

The net result of these activities is to move the net profit or loss for the
period into the retained earnings account, which appears in the stockholders'
equity section of the balance sheet.

Since the income summary account is only a transitional account, it is also

acceptable to close directly to the retained earnings account and bypass the
income summary account entirely.

Closing Entries Example

XYZ Trading is closing its books for the most recent accounting period. XYZ
had 50,000 of revenues and 45,000 of expenses during the period. For
simplicity, we will assume that all of the expenses were recorded in a single
account; in a normal environment, there might be dozens of expense
accounts to clear out. The sequence of entries is:

1. Empty the revenue account by debiting it for 50,000, and transfer the
balance to the income summary account with a credit. The entry is:

Debit Credit
Revenue 50,000
Income summary 50,000

2. Empty the expense account by crediting it for 45,000, and transfer the
balance to the income summary account with a debit. The entry is:

Debit Credit
Income summary 45,000
Expenses 45,000

3. Empty the income summary account by debiting it for 5,000, and transfer
the balance to the retained earnings account with a credit. The entry is:

Debit Credit
Income summary 5,000
Retained earnings 5,000

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 62

All of these entries have emptied the revenue, expense, and income
summary accounts, and shifted the net profit for the period to the retained
earnings account.

Closing Procedure

Having just described the basic closing entries, we must also point out that a
practicing accountant rarely uses any of them, since these steps are handled
automatically by any accounting software that a company uses. Instead, the
basic closing step is to access an option in the software to close the
accounting period. Doing so automatically populates the retained earnings
account for you, and prevents any further transactions from being recorded
in the system for the period that has been closed.

Instead of the preceding entries, the practicing accountant is more

concerned with completing a series of closing activities to ensure that all
material transactions have been included in the accounting period. These
closing activities include:

 Complete all customerinvoicing

 Accrue any revenue that cannot be billed
 Ensure that all supplier invoices have been entered
 Accrue any expenses for which no supplier invoices were received
 Update the allowance for doubtful accounts
 Accrue wages
 Update the annual leave accrual
 Calculate commissions owed to the sales staff
 Complete the bank reconciliation
 Calculate depreciation
 Verify the physical inventory count
 Value ending inventory
 Apply overhead to inventory and the cost of goods sold
 Calculatebusiness income taxes
 Verify the contents of all asset and liability accounts
 Complete the financial statements and review for errors
 Correct any errors found
 Release the financial statements

The number of closing activities may be quite substantially longer than the
list shown here, depending upon the complexity of a company's operations
and the number of subsidiaries whose results must be consolidated.

In addition, if the accounting system uses sub ledgers, it must close out each
sub ledger for the month prior to closing the general ledger for the entire
company. In addition, if the company uses several sets of books for its

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 63

subsidiaries, the results of each subsidiary must first be transferred to the
books of the parent company and all intercompany transactions eliminated.
If the subsidiaries also use their own sub ledgers, then their sub ledgers must
be closed out before the results of the subsidiaries can be transferred to the
books of the parent company.

Finally, if
the
parent
company
is
engaged
in any
cash
loan

activities, it may be necessary to record loans from the contributing

subsidiaries to the parent company for the amount of cash swept into the
investment account of the parent company, with the parent paying interest
to the subsidiaries for any loaned cash.

YEAR YEAR END CLSOING PROCEDURE USING PEACHTRE ACCOUNTING 2110

 From task menu select system………Year End wizard

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 64

  Click on Next

Select fiscal and payroll tax years……Next

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 65

  Select Next botton in order to get hard copy of listed reports, if u don’t
need it click on Checked None botton.and then Next

.
 If

you want to see Internal Accounting review before closing click on this
field if not click on Next button.

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 66

  Before closing the fiscal year you have to back up in ordered to get
soft copy of old fiscal year. So click on Back Up

 Set the reminder date and also checked including company name option,
Back Up, select the device and click on save..
 Next

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 67

  Select Archive Company option to create a separate copy of your company in
read only state.
 Next

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 68

  Select Next Fiscal Year Option, if you want to adjust next fiscal year you can
edit on this is window, most of the time Peachtree adjust the new fiscal year
if it is not changed.

Next


Confirm
your

yearend closing steps you can see that after closing your opening years will
be,
 Next

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 69

  Click on Begin Close
 Now Peachtree accounting Closing

VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 70

  CONGRATULATION
 Click Finish to close the Year End wizard
 In Order to check it, go to task menu select system.

 You
can
see
the

next two fiscal year

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VIRTUAL Accuntancy Training Documents, Last Revised JUN 2021 Page 72