Development Bank of Ethiopia Accounting Methods pp.ppt

በኢትዮጵያ ልማት ባንክ
እና
በኢትዮጵያ የንግድና ዘርፍ ማኅበራት
ምክር ቤት
የኢትዮጵያ ልማት ባንክ
Development Bank of Ethiopia
የኢትዮጵያ የንግድና ዘርፍ ማኅበራት
ምክር ቤት
Ethiopian Chamber of Commerce &
Sectoral Associations
1

እንደምን
አደራችሁ?
እንኳን ደህና
መጣችሁ!!!
2

3
Financial Statements Preparation and Analysis
( የሂሳብ መግለጫ አዘገጃጀትና እና ትንተና )
ዝግጅት: ወጋየሁ ወ/ኢየሱስ
ኢትዮጵያ
ÓO 2014 ዓ.ም

የ ሥልጠናው ዋና ዋና ዓላማዎች
1. አነስተኛ እና መካከለኛ የንግድ ተቋማትን (SMEs) የሂሳብ
መግለጫ አዘገጃጀት (Financial Statements Preparation)
እና የሂሳብ መግለጫ ትንተና ( Financial Statements
Analysis ) መሰረታዊ እውቀት ማስጨበጥ ፤
2. አነስተኛ እና መካከለኛ የንግድ ተቋማትን (SMEs)
የተበደሩትን ብር በአግባቡ መጠቀም እንዲችሉና እያንዳንዱ
ገቢ እና ወጪ እንድቆጣጠሩ የኣካውንቲንግ ሚና ማስገንዘብ ፤
3. አነስተኛ እና መካከለኛ የንግድ ተቋማት (SMEs) ገበያ ላይ
ተወዳዳሪ ሆነው እንዲዘልቁ እና ቁመናቸው በየጊዜው
እንድመዝኑ የሂሳብ መግለጫ ትንተና ስልቶችን (Financial
analysis techniques) እንድተገብሩ ማብቃት
5

የሥልጠናው ንዑስ ዓላማዎች
ሥልጠናው ሲጠናቀቅ ሠልጣኙ:
1) Accounting Cycle (አካውንቲንግ ኡደት ) ይገነዘባል፤
2) Financial Statements Elements ( የሂሳብ መግለጫ ኢለመንቶችን ) ይገነዘባል ፤
3) Types of Financial Statements ( የ ሂሳብ መግለጫ አይነቶችን ) ይለያል፤
4) Financial Statements (የሂሳብ መግለጫዎችን ) አዘገጃጀት ይረዳል ፤
5) Financial Analysis Techniques ( የሂሳብ መግለጫ ትንተና ስልቶችን ) ይገነዘባል፤
6) Financial Analysis ( የሂሳብ መግለጫ ትንተና ን) ይሠራል ::
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1) የጊዜ አስተዳደር
(የሥልጠናው አስተባባሪ እና ሰዓት ተቆጣጣሪ)
2) የሥልጠና ደንቦችን ማውጣት
3) የአነቃቂ ቡድን
(Fun Groups & Energizers )
የሥልጠናው አካሄድ
7

የሥልጠናው ደንቦች
1) ሥልጠናውን በንቃት መከታተል ፤
2) የሰውን ሀሳብ ማክበር ፤
3) ሰዓት ማክበር ፤
4) የጎንዮሽ ወሬ አለማውራት ፤
5) ሌሎች በሚናገሩበት ወቅት አለማደናቀፍ ፤
6) ሞባይል አለማስጮህ ፤
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What is Accounting ?
(አካውንቲንግ / የሂሳብ አያያዝ ማለት ምን
ማለት ነው?)
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(አካውንቲንግ / የሂሳብ አያያዝ ማለት ምን ማለት ነው?)…
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Observing events
Identifying those events that are
economic events
Measuring economic events in financial
terms
Recording economic events
(
(
Classifying economic events
(
Summarizing economic events
Reporting economic events in financial
statements and other reports
Interpreting the contents of financial
statements and other reports.
የ ዕለት-ዕለት ሥራ ዕንቅስቃሴዎችን መመልከት
የ ንግድ ሥራ ዕንቅስቃሴዎችን መለየት
የ ንግድ ሥራ ዕንቅስቃሴዎችን ዋጋ መረጃ መለየት
የ ንግድ ሥራ ዕንቅስቃሴዎችን መረጃ
መመዝገብ
(
(
መተንተን
l
(
ማደራጀት
የ ንግድ ሥራ ዕንቅስቃሴዎችን ሪፖርት
ማዘጋጀት
የ ንግድ ሥራ ዕንቅስቃሴዎችን ሪፖርት
መተንተን

 It is the language of business.
(አካውንቲንግ የንግድ ሥራ s”s ነው :: )
 It is an information system .
(አካውንቲንግ የመረጃ ሥርዓት ነው :: )
 It is support function not core function in
an organization.
(አካውንቲንግ በአንድ ድርጅት ዉስጥ አጋዥ ሥራ
መደብ ነው ::)
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 The basic objective of accounting is providing
financial information to business decision makers.
(የአካውንቲንግ ዋናው ዓለማ የንግድ ሥራ ዕንቅስቃሴን
በተመለከተ ትክክለኛ ውሳኔ ለማሳለፍ የሚያሰችሉ
መረጃዎችን ለ ተጠቃሚዎች መስጠት ነው፡፡)
 Accountants are advisors to business decision
makers.
( አካውንታንት በንግድ ሥራ ዕንቅስቃሴ ላይ ለተሰማሩ
ግለሰቦችና ድርጅቶች አማካሪ ነው ፡፡)
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 It is a means and not an end .
(አካውንቲንግ መንገድ/ስልት እንጂ ግብ አይደለም ፡፡)
 It deals with financial information and transactions.
(አካውንቲንግ የ ገንዘብ-ነክ መረጃ ጉዳይ ነው ፡፡ )
 Its outcome are financial/accounting reports.
(የ አካውንቲንግ ሥራ ውጤቶች የተለያዩ ፋይናንስ ሪፖርቶች
ናቸዉ ::)
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Characteristics of Accounting Information
(የ አካውንቲንግ መረጃ ባህሪያት)

 Accounting Information is financial in nature (i.e. expressed
in terms of monetary terms).
(የ አካውንቲንግ መረጃ ገንዘብ-ነክ ነው ::)
 Accounting information is numerical ( i.e. about measurable
events).
(የ አካውንቲንግ መረጃ አሃዛዊ ነው :: )
 Accounting Information should be understandable users .
(የ አካውንቲንግ መረጃ ለተጠቃሚዉ ግልጽ መሆን አለበት ::)
1
5

 Accounting Information should be complete,
(የ አካውንቲንግ መረጃ የተ ላ መሆን አለበት ፡፡ )
 Accounting Information shoud be accurate.
(የ አካውንቲንግ መረጃ ትክክለኛ መሆን አለበት ::)
 Accounting Information should be relevant for business
decisions;
(የ አካውንቲንግ መረጃ ለንግድ ውሳኔ ተዛማጅ መሆን አለበት ፡፡ )
 Accounting Information is reliable, etc.
(የ አካውንቲንግ መረጃ ታአማንነት ያለዉ መሆን አለበት ፡፡)
1
6

 Business transactions are the sources of accounting data.
(የ አካውንቲንግ መረጃ ምንጭ የ ንግድ ግብይቶች ናቸዉ ::)
 The outputs of accounting are various summaries, analysis
and reports.
(የ አካውንቲንግ ሥራ ውጤቶች የተለያዩ ፋይናንስ ሪፖርቶች
ናቸዉ ::)
 The accounting system can be either computerized
accounting system or manual accounting system .
(የ አካውንቲንግ ሥርዓት ዘመናዊ - በ ተክኖሎጂ የሚታገዝ
ወይም ልማዳዊ በ ተክኖሎጂ የማይታገዝ ልሆን ይችላል ::)
1
7

18
Users of Accounting Information
(የ አካውንቲንግ መረጃ ተጠቃሚዎች )

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Internal Users Information Need
1. Managers ( የድርጅቱ ሥራ ሐላፊዎች )
 Top level managers
( ከፍተኛ ደረጃ የድርጅቱ ሥራ ሐላፊዎች)
 Middle level managers
(መካከለኛ ደረጃ የድርጅቱ ሥራ ሐላፊዎች )
 Lower or operational level Mangers
( ዝቅተኛ ደረጃ የድርጅቱ ሥራ ሐላፊዎች )
 To plan company operations :
(የድርጅቱን ሥራ ያቅዳሉ ፡፡)
 To conduct company operations;
( የድርጅቱን ሥራ ይመራሉ ፡፡)
 To evaluate company operations;
(የድርጅቱን ሥራ ይቆጣጠራሉ ፡፡)
(የ አካውንቲንግ መረጃ ተጠቃሚዎች )…

20
S. No External users: Information Need
1 Investors
(ባለሃብቶች)
 For evaluation of financial soundness,
profitability and riskiness of investments.
(የንግድ ድርጅቶችን የፋይናንስ አቅም ፤ ትርፋማኔትን፤
ስጋትን ገምግመዉ ትክክለኛ ዉሳኔ ለመወሰን አካዉንቲንግ
መረጃዎቻቸዉን ይፈልጋሉ ፡፡)
2 Creditors
(Banks and Suppliers)
( አበዳሪዎች እና
አቅራብዎች)
 For evaluation of financial soundness of
customers before granting credit or loan.
(ብድር ለመስጠት ወይም የ ዱቤ ሽያጭ ለመፈፀም የ
ደንበኞቻቸዉን የፋይናንስ አቅም ገምግመዉ ትክክለኛ
ዉሳኔ ለመወሰን አካዉንቲንግ መረጃዎቻቸዉን ይፈልጋሉ
፡፡)
(የ አካውንቲንግ መረጃ ተጠቃሚዎች ) ….

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3 Customers
(ደንበኞች)
 For evaluation of product quality, price
and warranties.
(የንግድ ድርጅቶችን የምርት ጥራት ፤ ዋጋ ፤
የምሰጠዉን ዋሰትና ገምግመዉ ትክክለኛ ዉሳኔ
ለመወሰን አካዉንቲንግ መረጃዎቻቸዉን ይፈልጋሉ
፡፡)
4 Employees & Labor Union
( ሠራተኞችና የሠራተኛ
ማህበር)
 For evaluation of financial stability and
profitability of the organization .
 የንግድ ድርጅቶችን የፋይናንስ አቅምና ትርፋማኔትን
ገምግመዉ ትክክለኛ ዉሳኔ ለመወሰን አካዉንቲንግ

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5 Board of Directors
(BOD/BOM)
( የድርጅቱ ሥራ አመራር ቦርድ
)
 For business concerns or decisions.
( የንግድ ሥራዎችን በተመለከተ አስፈላጊ ዉሳኔዎችን
ለማሳለፍ አካዉንቲንግ መረጃዎቻቸዉን ይፈልጋሉ
፡፡)
6 Government
( መንግስት )
 For formulation and inaction of
national policies.
(ሀገራዊ ፖሊሲ ለማዘጋጀትና ለመተግበር የንግድ
ድርጅቶችን አካዉንቲንግ መረጃ ይፈልጋል ፡፡)

23
S. No External users Information Need
7 Tax-authorities
(ገቢዎች እና ጉምሩክ)
For imposing and collecting taxes & duties.
(በንግድ ድርጅቶች ላይ የ መንግስትን ግብርና
ቀረጥ ለመጣልና ለመሰብሰብ አካዉንቲንግ
8 Industrial Authorities
(የኢንዱስትሪ ዎች ተቆጣጣሪ
ባለሥልጣን)
For development and supervision of
industries in the country.
(የንግድ ድርጅቶችን ለማልማትና ለመቆጣጠር
አካዉንቲንግ መረጃዎቻቸዉን ይፈልጋሉ ፡፡)

24
S. No External users Information Need
9 Parliament ( የሕዝብ ተወካዮች )  For national socio-economic decisions.
( ኢኮኖሚያዊና ማህበራዊ ጉዳዮችን በተመለከተ
አስፈላጊ ዉሳኔዎችን ለማሳለፍ የንግድ ድርጅቶችን
አካዉንቲንግ መረጃ ይፈልጋሉ ፡፡)
10 Economists and Researchers
(የምጣኔ ባለሙያዎች እና
ተመራማሪዎች )
 For research-work and developmental thesis.
( ለ ፖሊሲ ግብዓት የምሆኑ አዳድስ ጥናቶችንና
ምርምሮችን ለማካሄድ የንግድ ድርጅቶችን
አካዉንቲንግ መረጃ ይፈልጋሉ ፡፡)

25
Accounting Concepts and Principles
(የ አካውንቲንግ እሳቤዎች እና መርሆች )

1. Business entity/ Economic Entity Concept
( የንግድ ድርጅት እሳቤ )
 It requires that the activities of the business entity should be kept
separate and distinct from that of owners & other parties.
ምሳሌ ፡ Bank Account , Properties, Debts, Revenues, Expenses, Accounting
Records and Reports, etc.
2
6
(የ አካውንቲንግ እሳቤዎች እና መርሆች )…

2.Cost Principle. ( የዋጋ ስሌት መርህ )
 It states that assets should be recorded at their cost.
• Cost - is the value exchanged at the time something is
acquired.
• Cost – includes all normal and necessary cost incurred to
put the asset ready for the intended use.
2
7
(የ አካውንቲንግ እሳቤዎች እና መርሆች )…

Which one of the following is correct as per Business entity/ Economic Entity
Concept ?
a. Having the same bank account for business and personal purpose.
b. Separation of personal properties from business properties.
c. Buying automobile to the spouse from business income.
d. Reporting personal expenses on the income statement.
ይሞክሩት!
28

Assume that you purchased a vehicle at a cash price of Br 220,000.
Related expenditures consist of title transfer fees Br 13, 200; painting
and lettering Br 5,000; driving license Br 800, and a three-year accident
insurance policy Br 16, 000.
Required: What is the cost of vehicle ?
ይሞክሩት!
29

30 Basic Accounting Equation
(የ አካውንቲንግ መሪ ቀመር )

 Provides the underlying framework for recording and summarizing economic events.
 Assets are claimed by either creditors or owners.
 Claims of creditors must be paid before ownership claims.
Assets
(ሃብት )
Liabilities
(ዕዳ)
Owner’s Equity
( የተጣራ ሃብት )
= +
Basic Accounting Equation
(የ አካውንቲንግ መሪ ቀመር )…
31

a) Cash ( ጥሬ ገንዘብ )
 Cash on hand and Cash at Bank
 It is any medium of exchange that
Banks accept at face value.
የንግድ ድርጅት ንብረቶች (Assets ) …
32

b) Accounts Receivable (A/R)
(ተሰብሳቢ ሂሳብ)
 money claims against
customers for credit sales
or services.
33

c) Inventory
 Items held for sale or use.
 Supplies Inventory (E.g. Papers, Pens,
Pencils, Writing Pads, File boxes, etc)
(የቢሮ አላቂ ዕቃዎች)
34

3. Inventory
 Merchandise Inventory – goods
held for sale. ( ሸቀጣሸቀጦች)
35

c) Inventory
 Raw Materials Inventory - inputs
for use in production.
(ጥሬ ዕቃዎች )
36

c) Inventory
 Work-in -Process or Goods In
Process Inventory – Semi-
processed goods not yet
completed. ( ያልተጠናቀቀ ምርት )
37

c) Inventory
 Finished Goods Inventory-
completed goods held for sale.
( ያለቀለት ምርት )
38

d) Prepaid Expenses
( የ ወጪ ቅድመ -ክፍያዎች)
 advance payments for
expenses for a future benefit
for the business.
 Prepaid Rent, Insurance, etc.
39

e) Accrued revenues/assets
( ውዝፍ ገቢዎች)
 Revenues earned but not yet
collected.
 Accrued Interest Revenue,
Rent Revenue, etc.
40

f) Investment in Bond or Stock
(የ ቦንድ ወይም አክስዮን ግዥ
ሠነዶች)
 Revenues earned but not yet
collected.
 Accrued Interest Revenue,
Rent Revenue, etc.
41

g) Intangible asserts
( አእም ዊ ንብረቶች )
 Rights or Privileges
42

h) Furniture
( የቢሮ ጠረጴዛዎችና
ወንበሮች)
 Tables, Chairs, Shelves, etc.
43

i) Vehicle (መኪና)
 Automobile, Tucks , Buses, etc,
44

j) Office Equipment
( የቢሮ መገልገያ
መሣሪያዎች)
 Computer, Pinter, Photo Copy
Machine, etc.)
45

K) Plant and Machineries
( የተለያዩ ማሽኖች)
 Factory Plants, Machines,
Generators, etc, )
46

l) Building (ሕንጻ )
 Office building, Factory
Building/Shades, Store Building,
etc.
47

m) Land (Right of Use Land )
( በሊዝ የተገዛ ቦታ )
 Land for construction of own
Building, Factory, etc.
 Farming land
48

1. List down the assets what you have in your
organization.
2. Determine the total amount of the assets in your
organization.
ይሞክሩት!
49
የንግድ ድርጅት ንብረቶች (Assets )

 Claims against assets (debts and obligations).
 creditor’s claim on total assets.
 Creditors - party to whom money is owed.
Liabilitiy (እዳ)
Assets
(ሃብት )
Liabilities
(ዕዳ)
Owner’s Equity
= +
50
የንግድ ድርጅት ዕዳዎች (Liabilities ) …

a) Accounts Payable
( ተከፋይ ሂሳብ )
 It is a liability created due to
purchasing goods and services on
account.
51

b) Accrued Liabilities
( ውዝፍ ወጪዎች )
 Expenses incurred but not yet
paid.
 Interest Payable, Salary Payable,
Income Tax Payable , etc.
52

c) Unearned Revenues
(የ ገቢ ቅድመ -ክፍያዎች)
 Revenues collected but not yet
received.
 Unearned Rent, Insurance,etc.
53

d) Mortgage Payable
( የsT> ንብረት ዋስትና ብድር
)
 The long‐term financing used to
purchase property backed with
collateral.
54

e) Bonds Payable
( የ ቦንድ ዕዳ )
 Bonds represent an obligation to
repay a principal amount at a future
date and pay interest, usually on a
semi‐annual basis. .
55

f) Lease Obligations
( የሊዝ ዕዳ )
 In a lease, the property owner
(lessor) gives the right to use
property to a third party (lessee) in
exchange for a series of rental
payments.
.
56

1. List down the liabilities in your organization.
2. Compute the total amount of liabilities of your
organization.
ይሞክሩት!
57
የንግድ ድርጅት ዕዳዎች (Liabilities )

 Ownership claim on total assets.
 Referred to as residual equity.
i. Investment by owners and revenues (+)
ii. Drawings/withdrawal and expenses (-).
3. Owner’s Equity / Capital / Net Asset (የተጣራ ሃብት)
Assets
(ሃብት )
Liabilities
(እዳ)
Owner’s Equity
= +
58
የንግድ ድርጅት የተጣራ ሃብት ( Capital ) …

1. Investments by owner - are the assets the owner puts into the business.
2. Revenues - result from business activities entered into for the purpose of
earning income.
 Common sources of revenue are sales, fees, services, commissions, interest, dividends,
royalties, and rent.
Increases in Owner’s Equity
59

1. Drawings - an owner may withdraw cash or other assets for personal use.
2. Expenses - are the cost of assets consumed or services used in the process of
earning revenue.
 Common expenses are salaries expense, rent expense, utilities expense,
tax expense, etc.
Decreases in Owner’s Equity
60

Revenue ( ገቢ )
• It is amount charged to customers for
goods and services sold to them.
a) Sales revenue from sale of
merchandises and services;
b) Fees revenue (earned) for charges
by a physician to patients;
c) Commission revenue to
Commission agents;
61
የንግድ ድርጅት ገቢዎች ( Revenues ) …

e) Interest revenue for banks;
f) Dividends revenue to share
holders;
g) Rent revenue ( earned) for the use
of real estate or property ;
h) Fares earned for Taxi;
i) Royalties revenue for ownership
right; etc.
62
የንግድ ድርጅት ገቢዎች ( Revenues )

Expense (ወጪ )
• It is the cost of assets consumed or
services used in the process of
earning or generating revenue.
a) Salary Expense ;
b) Utility expense (Electricity, Water,
Telephone expense);
c) Delivery expense (Gasoline, repairs,
license, etc.),
63
የንግድ ድርጅት ወጪዎች ( Expenses ) …

d) Supplies expense (Stationeries,
napkins, detergents, etc.),
e) Rent expense;
f) Interest expense ;
g) Income tax expense;
h) Miscellaneous expense, etc.
64
የንግድ ድርጅት ወጪዎች ( Expenses ) …

Net income (Net Profit) will result during a time period when:
a. assets exceed liabilities.
b. assets exceed revenues.
c. expenses exceed revenues.
d. revenues exceed expenses.
ይሞክሩት!
65

Given
Assume that you have personal business
named Ginger Trading.
• Revenues for 2014 = Br 900,000;
• Expenses for 2014 = Br 700,000
• Additional Investment = Br 80,000
• Drawing/Withdrawal = Br 20,000
• Capital (Hamle 1, 2013) = Br 240,000
• Liability (Sene 30,2014) = Br 300,000
Required:
a) Compute Net Income (Profit) for 2014
b) Compute total capital on Sene 30, 2014.
c) Compute total assets on Sene 30,2014.
ይሞክሩት!
66

1. Compute the total amount of capital of your
organization.
ይሞክሩት!
67

Accounting Cycle
(የ አካዉንቲንግ ኡደት)
68

Accounting Cycle (የ አካዉንቲንግ ኡደት)…
69

Accounting cycle (የአካውንቲንግ ኡደት)…
70
 Accounting Cycle in Computerized System/data processing
cycle consists of four steps:
1. Data input ( መረጃ ማስገባት)
2. Data storage ( መረጃ ማከማቸት)
3. Data processing ( መረጃ ማጠናቀር)
4. Information Output ( ሪፖርት ማዘጋጀት)

Accounting cycle (የአካውንቲንግ ኡደት)…
INPUT
(ግብዓት)
OUTPUT
(ውጤት)
PROCESS
(ሂደት)
FEEDBACK
DATA INFORMATION
71

72
Recording Business Transactions and Preparation
of Financial Statements
(የሂሳብ መዝገብ አያያዝ የምዝገባ ሂደት እና የሂሳብ
መግለጫ ዝግጅት)

I.
The Recording Process
(የሂሳብ መዝገብ አያያዝ የምዝገባ
ሂደት )
73

Business transaction -. is an economic event or condition that directly
changes an entity’s financial condition or directly affects its results of
operations . E.g. Sales, Purchases, Collections, Pyaments, etc.
Business Transaction (የንግድ ልውውጥ / ግብይት )
7
4

ምሳሌ: Are the following events recorded in the accounting records?
Event
(ክስተት)
Purchase computer
(ኮምፒውተር ገዛ)
Criterion
( መስፈርት )
Is the financial position (assets, liabilities, or equity) of the company changed?
Discuss product
design with
customer.
Pay rent
(የቢሮ ኪራይ ከፈለ)
Record/ Don’t Record
(ውሳኔ)
የሚከተሉት ክስተቶች ይመዘገባሉ / አይመዘገቡም ?
ይሞክሩት!
75

Double-entry system ( ሚዛናዊ የሂሳብ ምዝገባ ስርዓት )
► Each transaction must affect two or more accounts to keep the basic accounting
equation in balance.
► Recording done by debiting at least one account and crediting another.
► DEBITS must equal CREDITS.
► Italy in 15th century (1494).
► Franciscan monk , Luca Pacioli, Italian Renaissance
mathematician.
Debits and Credits ( ዴቢት እና ክሬዲት )
Account/ Ledger Account (አካውንት/ ሂሳብ)…
77

Account Name
Debit / Dr. Credit / Cr.
If Debit amounts are greater than Credit amounts, the account will have a
debit balance.
$10,000 $3,000
$15,000
8,000
Transaction #3
Balance
Transaction #1
Debits and Credits ( ዴቢት እና ክሬዲት)…
78

Account Name
$10,000 $3,000
Balance
Transaction #1
$1,000
8,000
If Debit amounts are less than Credit amounts, the account will have a
credit balance.
79

 Assets - Debits should exceed credits.
 Liabilities – Credits should exceed debits.
 Normal balance - is on the increase side.
Chapter
3-23
Assets
Assets
Normal Balance
Normal Balance
Chapter
3-24
Liabilities
Liabilities
Normal Balance
Normal Balance
80

 Owner’s investments and revenues increase
owner’s equity (credit).
 Owner’s drawings and expenses decrease
owner’s equity (debit).
Chapter
3-25
Normal Balance
Owner’s Capital
Chapter
3-23
Owner’s Drawing
Normal Balance
Chapter
3-25
Normal Balance
Owner’s Equity
Helpful Hint Because
revenues increase owner’s
equity, a revenue account
has the same debit/credit
rules as the Owner’s
Capital account. Expenses
have the opposite effect.
81

Chapter
3-27
Normal Balance
Normal Balance
Expense
Expense
Chapter
3-26
Normal Balance
Normal Balance
Revenue
Revenue
 The purpose of earning revenues is to benefit the
owner(s).
 The effect of debits and credits on revenue
accounts is the same as their effect on Owner’s
Capital.
 Expenses have the opposite effect: expenses
decrease owner’s equity.
82

Debits:
a. increase both assets and liabilities.
b. decrease both assets and liabilities.
c. increase assets and decrease liabilities.
d. decrease assets and increase liabilities.
Debits/Credits Rules (የዴቢት እና ክሬዲት ህጎች )…
ይሞክሩት!
83

Accounts that normally have debit balances are:
a. assets, expenses, and revenues.
b. assets, expenses, and equity.
c. assets, liabilities, and owner’s drawing.
d. assets, owner’s drawing, and expenses.
Debits/Credits Rules (የዴቢት እና ክሬዲት ህጎች )…
ይሞክሩት!
84

 Book of original entry.
 Transactions recorded in chronological order.
 Contributions to the recording process:
1. Discloses the complete effects of a transaction.
2. Provides a chronological record of transactions.
3. Helps to prevent or locate errors because the debit and credit amounts can be easily
compared.
Journal (ጆርናል / የሂሳብ መዝገብ)
Steps in the Recording Process
(የሂሳብ መዝገብ አያያዝ የምዝገባ ሂደት)…
85

# 3 steps of transaction analysis before recording.
1. Determine what accounts involved in the transaction.
2. Determine the classification of accounts (Asset, Liability & Capital)
what items increased or decreased and by how much.
3. Determine the effect (increase or decrease) in terms of debits and
credits.
86

Journalizing - Entering transaction data in the journal.
ምሳሌ # 1 : On September 1, ABC Trading invested Br 15,000 cash in the
business; The Company also purchased Equipment for Br 7,000 cash.
Account Title Ref. Debit Credit
Date
Cash
Owner’s Capital
Sept. 1 15,000
15,000
General Journal
Equipment
Cash
7,000
7,000
87

ምሳሌ # 2: On July 1, ABC Trading purchases Equipment costing
Br 14,000. It pays Br 8,000 cash now and agrees to pay the
remaining Br 6,000 on account.
Account Title Ref. Debit Credit
Date
Equipment
Cash
July 1 14,000
8,000
General Journal
6,000
Accounts payable
88

 General Ledger contains the entire group of accounts maintained by a company.
Ledger (ለጄር / የሂሳብ sƒ)
89

( የሂሳብ መዝገብ አያያዝ የምዝገባ ሂደት )…
Standard Form of Account ( የተለመደ ሌጀር አካውንት ፎርም )
90

 Accounts and account numbers arranged in sequence in which they are presented in the
financial statements.
Chart of Accounts ( የሌጀር አካዉንት ቻርት/ዝርዝር)…
91

Posting –
process of
transferring
amounts from the
journal to the ledger
accounts.
Steps of Posting ( ከ ጆርናል ወደ ሌጀር የ ማስተላለፍ
ሂደት )…
92

Posting:
a. normally occurs before journalizing.
b. transfers ledger transaction data to the journal.
c. is an optional step in the recording process.
d. transfers journal entries to ledger accounts.
Posting ( ከ ጆርናል ወደ ሌጀር ማስተላለፍ )…
ይሞክሩት!
93

KK Trading recorded the following transactions in a general journal during the
month of March. Post these entries to the Cash account.
Mar. 4 Cash 2,280
Service Revenue 2,280
Mar. 15 Salaries and Wages Expense 400
Cash 400
Mar. 19 Utilities Expense 92
Cash 92
ይሞክሩት !
94

Trial Balance ( የ ሂሳብ ሚዛን )…
95

96
II.
Adjusting the Accounts
(የሂሳብ መዝገብ አያያዝ የ ሂሳቦች
ማስተካከያ ሂደት )

Generally a
 month,
 quarter, or
 year.
Accountants divide the economic life of a business into artificial time periods
(Time Period Assumption).
Jan. Feb. Mar. Apr. Dec.
. . . . .
Alternative Terminology
The time period assumption is also called the
periodicity assumption.
Timing Issues ( የጊዜ ጉዳይ )…
97

I. Cash-Basis Accounting ( ገንዘብ - መር አካውንቲንግ ስርዓት) :
1. Revenues recognized when cash is received.
2. Expenses recognized when cash is paid.
3. Cash-basis accounting is not in accordance with generally accepted
accounting principles (GAAP/IFRS).
Basis of Accounting ( የ አካውንቲንግ መሠረታዊ ስርዓቶች )…
98

II. Accrual-Basis Accounting ( ድርጊት - መር አካውንቲንግ ስርዓት )
 Transactions recorded in the periods in which the events occur.
 Companies recognize revenues when they perform services (rather than when
cash is received).
 Expenses are recognized when incurred (rather than when paid).
Basis of Accounting (የ አካውንቲንግ መሠረታዊ ስርዓቶች )…
99

Revenue Recognition Principle ( የገቢ ምዝገባ መርህ )
Recognize revenue in the accounting period
in which the performance obligation is
satisfied.
Accrual-Basis Accounting ( ድርጊት - መር አካውንቲንግ
ስርዓት)…
100

Expense Recognition Principle ( የወጪ ምዝገባ
መርህ )
Match expenses with revenues in the
period when the expense makes its
contribution to revenue.
“Let the expenses follow the revenues.”
ስርዓት )…
101

One of the following statements about the accrual basis of accounting is false? That
statement is:
a. Events that change a company’s financial statements are recorded in the periods in
which the events occur.
b. Revenue is recognized in the period in which the performance obligation is satisfied.
c. The accrual basis of accounting is in accord with generally accepted accounting
principles.
d. Revenue is recorded only when cash is received, and expenses are recorded only
when cash is paid.
ይሞክሩት !
ስርዓት )…
102

Given
• Revenues Collected = Br 700,000
• Revenues earned but not yet collected = Br 300,000
• Expenses paid = Br 400,000
• Expenses incurred but not yet paid = Br 100,000
Required : Determine total revenue, expense and net income/loss
1. Cash-Basis Accounting
2. Accrual-Basis Accounting
ይሞክሩት !
ስርዓት )…
103

 Adjusting Entries -
 Ensure that the revenue recognition and expense recognition principles
are followed.
 Necessary because the trial balance may not contain up-to-date and complete
data.
 Required every time a company prepares financial statements.
 Will include one income statement account and one balance sheet account.
Adjusting Entries (የ ሂሳቦች ማስተካከያ ምዝገባ ሂደት)…
104

 Adjusting entries are made to ensure that:
a. expenses are recognized in the period in which they are incurred.
b. revenues are recorded in the period in which services are performed.
c. balance sheet and income statement accounts have correct balances at
the end of an accounting period.
d. all of the above.
ይሞክሩት !
105

Types of Adjusting Entries (የ ሂሳቦች ማስተካከያ ዓይነቶች)
1. Prepaid Expenses. Expenses paid in
cash before they are used or consumed.
Deferrals
1. Accrued Revenues. Revenues for
services performed but not yet received in
cash or recorded.
2. Accrued Expenses. Expenses incurred
but not yet paid in cash or recorded.
2. Unearned Revenues.
Cash received before services are
performed.
Accruals
106

Payment of cash, that is recorded as an asset because service or benefit will be
received in the future.
 insurance
 supplies
 advertising
Cash Payment Expense Recorded
BEFORE
 rent
 equipment
 buildings
Prepayments often occur in regard to:
1. Prepaid Expenses (የ ወጪ ቅድመ-ክፍያዎች) …
107

 Expire either with the passage of time or through use.
 Adjusting entry:
1. Increase (debit) to an expense account and
2. Decrease (credit) to an asset account.
1. Prepaid Expenses (የ ወጪ ቅድመ-ክፍያዎች)
108

Depreciation ( የእርጅና ቅናሽ ) …
 Buildings, equipment, and motor vehicles (assets that provide service for many
years) are recorded as assets, rather than an expense, in the year acquired.
 Depreciation is the process of allocating the cost of an asset to expense over its
useful life.
 Depreciation does not attempt to report the actual change in the value of the
asset.
109

Receipt of cash that is recorded as a liability because the service has not been
performed.
 Rent
 Airline tickets
Cash Receipt Revenue Recorded
BEFORE
 Magazine subscriptions
 Customer deposits
Unearned revenues often occur in regard to:
2. Unearned Revenue (የ ገቢ ቅድመ-ክፍያዎች)…
110

 Adjusting entry is made to record the revenue for services performed during the
period and to show the liability that remains at the end of the period.
 Results in a decrease (debit) to a liability account and an increase (credit) to a
revenue account.
2. Unearned Revenues (የ ገቢ ቅድመ-ክፍያዎች) …
111

 Accruals are made to record-
1. Revenues for services performed
OR
2. Expenses incurred
 in the current accounting period that have not been recognized through daily
entries.
Adjusting Entries for Accruals (አኩራሎችን ማስተካከል )…
112

Revenues for services performed but not yet received in cash or recorded.
 Rent
 Interest
 Services performed
Accrued revenues often occur in regard to:
1. Accrued Revenues (Assets) ( ውዝፍ ገቢዎች )
BEFORE Cash Receipt
Revenue Recorded
113

 Adjusting entry shows the receivable that exists and records the revenues for
services performed.
1. Increases (debits) an asset account and
2. Increases (credits) a revenue account.
1. Accrued Revenues (Assets) (ውዝፍ ገቢዎች )…
114

Expenses incurred but not yet paid in cash or recorded.
 Rent
 Interest
 Taxes
 Salaries
Accrued expenses often occur in regard to:
BEFORE Cash Payment
Expense Recorded
2. Accrued Expenses ( Liabilities) ( ውዝፍ ወጪዎች )
115

 Adjusting entry records the obligation and recognizes the expense.
1. Increase (debit) an expense account and
2. Increase (credit) a liability account.
2. Accrued Expenses ( Liabilities ) (ውዝፍ ወጪዎች )…
116

III.
Completing the Accounting Cycle
(የአካውንቲንግ ኡደት የ ማጠናቀቅ ሂደት)
117

118
Financial Statements Preparation
(የ ሂሳብ መግለጫ አዘገጃጀት)

 There are four (4) basic kinds of Financial Statements.
1. Statement of Financial Performance or Income
Statement (የገቢ ና ወጪ መግለጫ )
2. Statement of Owners’ Equity or Capital Statement
(የካፒታል/ የተጣራ ሃብት መግለጫ )
3. Statement of Financial Position or Balance Sheet)
( የሃብትና ዕዳ መግለጫ )
4. Statement of Cash Flow (የጥሬ ገንዘብ ፍሰት
መግለጫ )
119
Financial Statements (የሂሳብ መግለጫዎች )…

International Accounting Standards 1 (IAS 1) covers the
guidelines for the presentation, structure and content of
financial statements.
 The main components are:
1) Statement of financial position (SFP)
2) Statement of profit or loss and other comprehensive
income (SPLOCI)
3) Statement of changes in equity (SCE)
4) Statement of cash flows (SCF)
5) Notes to the financial statements
120

1. Category A taxpayers (ደረጃ ሀ ግብር ከፋዮች )
• A body or any other person having annual gross income of
ETB 1,000,000 or more.
2. Category B taxpayer (ደረጃ ለ ግብር ከፋዮች )
• A person, other than a body, having an annual gross income
of ETB 500,000 or more, but less than ETB 1,000,000.
3. Category C taxpayer (ደረጃ ሐ ግብር ከፋዮች )
• A person, other than a body, having an annual gross
income of less than ETB 500,000.
121
Categories of tax payers in Ethiopia
(ግብር ከፋዮች ደረጃ አመዳደብ )

AABE Roadmap… (Revised)
122
Revised adoption of IFRS/IPSAS in Ethiopia is
scheduled as:
1. እስከ 2015 ዓ.ም/ 2023 G.C / ሙሉ ደረጃዎችን /Full
IFRS/ የሚተገብሩ፡
i. ከፍተኛ የህዝብ ጥቅም ያለባቸዉ (Significant
PIEs)፣
ii.ሌሎች የህዝብ ጥቅም ያለባቸዉ (Other PIEs)
ሲሆኑ፣

123
2. እስከ 2016 ዓ.ም/ 2024 G.C / ሙሉ ደረጃዎችን
የሚተገብሩ፡
i. አነስተኛ እና መካከለኛ ድርጅቶች /IFRS for SMEs/
ደረጃዎችን እና
ii.የበጎ አድራጎት ድርጅቶች እና ማህበራት /Accrual
IPSASs/ የሚተገብሩ

124
If at least two of the following quantitative
threshold is met, the company falls into Other PIEs
category & required to apply IFRS.
i. Annual Turnover > Br 300,000,000;
ii. Total Asset > Br 200,000,000;
iii.Total Liability > Br 200,000,000;
iv. Employees >200 employees.

125
If at least two of the following quantitative threshold is
met, the company falls into SMEs category and required
to apply IFRS for SMEs:
i. Annual Turnover = Br 20,000,000 -Br 300,000,000;
ii. Total Asset = Br 20,000,000 - Br 200,000,000;
iii.Total Liability = Br 20,000,000-Br 200,000,000;
iv.Employees = 20-200 employees.

 Reports the revenues and expenses for a specific period of time.
 Lists revenues first, followed by expenses.
 Shows net income (or net loss).
Income Statement (የገቢ ና ወጪ መግለጫ )
126

 Reports the changes in owner’s equity for a specific period of time.
 The time period is the same as that covered by the income statement.
Owner’s Equity Statement (የካፒታል/ የተጣራ ሃብት መግለጫ )
127

 Proprietorship - one capital account.
 Partnership - capital account for each partner.
 Corporation - Capital Stock and Retained Earnings.
Owner’s Equity (የካፒታል / የተጣራ ሃብት)
128

 Reports the assets, liabilities, and owner’s equity at a specific date.
 Lists assets at the top, followed by liabilities and owner’s equity.
 Total assets must equal total liabilities and owner’s equity.
 Is a snapshot of the company’s financial condition at a specific moment in time
(usually the month-end or year-end).
Balance Sheet ( የሃብትና ዕዳ መግለጫ )
129

 Information for a specific period of time.
 Answers the following:
1. Where did cash come from?
2. What was cash used for?
3. What was the change in the cash balance?
Statement of Cash Flows (የጥሬ ገንዘብ ፍሰት መግለጫ)
130

Which of the following financial statements is prepared as of a specific date?
a. Balance sheet.
b. Income statement.
c. Owner's equity statement.
d. Statement of cash flows.
ይሞክሩት !
131

1. Multiple-column form used in preparing financial statements.
2. Not a permanent accounting record.
3. Five step process.
4. Use of worksheet is optional.
Worksheet ፡
Worksheet ( የሂሳብ ሥራ አጋዥ ሰንጠረዥ )
132

Steps in Preparing a Worksheet ( የሂሳብ ሥራ አጋዥ ሰንጠረዥ አዘገጃጀት
ሂደት )…
133

1. Income statement is prepared from the income statement columns.
2. Balance sheet and owner’s equity statement are prepared from the
balance sheet columns.
3. Companies journalize and post adjusting entries.
Preparing Statements from a Worksheet
(ከ ሂሳብ ሥራ አጋዥ ሰንጠረዥ የሂሳብ መግለጫዎችን
ማዘጋጀት)…
134

Account Titles Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr. Dr. Cr.
Cash 15,200 15,200 15,200
Supplies 2,500 1,500 1,000 1,000
Prepaid Insurance 600 50 550 550
Office Equipment 5,000 5,000 5,000
Notes Payable 5,000 5,000 5,000
Accounts Payable 2,500 2,500 2,500
Unearned Revenue 1,200 400 800 800
Owner's Capital 10,000 10,000 10,000
Owner's Drawing 500 500 500
Service Revenue 10,000 400 10,600 10,600
200
Salaries Expense 4,000 1,200 5,200 5,200
Rent Expense 900 900 900
Totals 28,700 28,700
Supplies Expense 1,500 1,500 1,500
Insurance Expense 50 50 50
Accumulated Depreciation 40 40 40
Depreciation Expense 40 40 40
Accounts Receivable 200 200 200
Interest Expense 50 50 50
Interest Payable 50 50 50
Salaries Payable 1,200 1,200 1,200
Totals 3,440 3,440 30,190 30,190 7,740 10,600 22,450 19,590
Net Income 2,860 2,860
Totals 10,600 10,600 22,450 22,450
Balance Sheet
Adjusted Income
Trial Balance Adjustments Trial Balance Statement
(a)
(b)
(a)
(g)
(c)
(d)
(d)
(e)
(b)
(e)
(f)
(f)
(g)
(c)
(ከ ሂሳብ ሥራ አጋዥ ሰንጠረዥ የሂሳብ መግለጫዎችን ማዘጋጀት)
135

ማዘጋጀት)…
136

ማዘጋጀት)…
137

ማዘጋጀት)… Illustration 4-4
138

139
Preparing Financial Statements
( የሂሳብ መግለጫዎችን ማዘጋጀት)…

140

141

142

143 Closing the book of accounts
( ሂሳብ የ መዝጋት ሂደት)

At the end of the accounting period, the company makes the accounts ready for
the next period.
Closing the Books ( ሂሳብ የ መዝጋት ሂደት)…
144

Closing
Entries
Closing the Books (ሂሳብ የ መዝጋት ሂደት)…
145

Posting
Closing
Entries
Closing the Books (ሂሳብ የ መዝጋት ሂደት)…
146

147 Post-Closing Trial Balance
(ድህረ-መዝጊያ የሂሳብ ሚዛን )

Purpose is to prove the equality of the permanent account balances after journalizing
and posting of closing entries.
Post-Closing Trial Balance (ድህረ-መዝጊያ የሂሳብ
ሚዛን )…
148

149 Correcting Entries
(የሂሳብ ምዝገባ ስህተቶችን የ ማረም ሂደት)

1. Unnecessary if the records are error-free.
2. Made whenever an error is discovered.
3. Must be posted before closing entries.
 Instead of preparing a correcting entry, it is possible to reverse the incorrect
entry and then prepare the correct entry.
Correcting Entries (የሂሳብ ምዝገባ ስህተቶችን የ ማረም
ሂደት)…
Correcting Entries—An Avoidable Step
150

ምሳሌ # 1 : On May 10, Marco Company journalized and posted a Br 50 cash
collection on account from a customer as a debit to Cash Br 50 and a credit to
Service Revenue Br 50. The company discovered the error on May 20, when the
customer paid the remaining balance in full.
Cash 50
Incorrect entry
Service Revenue 50
Cash 50
Correct entry
Accounts Receivable 50
Service Revenue 50
Correcting entry
Accounts Receivable 50
Correcting Entries (የሂሳብ ምዝገባ ስህተቶችን የ ማረም ሂደት)…
151

ምሳሌ # 2 : On May 18, Marco Comany purchased on account equipment costing Br
450. The transaction was journalized and posted as a debit to Equipment Br 45 and a
credit to Accounts Payable Br 45. The error was discovered on June 3,
Correcting Entries (የሂሳብ ምዝገባ ስህተቶችን የ ማረም ሂደት)…
Equipment 45
Incorrect entry
Accounts Payable 45
Equipment 450
Correct entry
Accounts Payable 450
Equipment 405
Correcting entry
Accounts Payable 405
152

Financial Statements Analysis
(የሂሳብ መግለጫ መተንተን)
153

Financial Statements Analysis
( የሂሳብ መግለጫ መተንተን )
 It is also called Financial Analysis / Accounting analysis /
Analysis of finance.
 It is the process of identifying the financial strengths and
weaknesses of the firm by properly establishing
relationship between financial statements items.
 It is the process of analyzing a company's financial
statements for business decision-making purposes such as
assist investment, financing, and dividend decisions.
154

Purpose of Financial Analysis
(የሂሳብ መግለጫ ትንተና ጠቀሜታ )
1. Assessment of Past Performance - Past performance is a good
indicator of future performance.
2. Assessment of current position - to assess the current position
of the firm.
3. Prediction of profitability and growth prospects - to assess
and predict the earning prospects and growth rates.
4. Prediction of bankruptcy and failure - to assess and predict
bankruptcy and probability of business failure.
5. Assessment of the operational efficiency - to assess the
operational efficiency of the management of a company.
155

 Major Types of Financial Analysis
(ዋና ዋና የሂሳብ መግለጫ ትንተና ስልቶች )
I. Horizontal Analysis ( አግድም ትንተና )
II. Vertical Analysis ( ሰያፍ ትንተና )
III. Ratio Analysis ( ሬሾ /አንፃራዊ ትንተና )
Techniques of Financial Analysis
(የሂሳብ መግለጫ ትንተና ስልቶች)
156

I) Horizontal Analysis ( የ አግድም ትንተና
)…
 Horizontal analysis –
 It is used in the review of a company's financial
performance over multiple periods.
 It allows users to easily spot trends and growth
patterns over a number of accounting periods
 It is used to compare historical data, such as ratios, or
line items, over a number of accounting periods.
 የተለያዩ የሂሳብ መግለጫዎችን በመጠቀም ከግዜ ወደ
ግዜ ያለዉን ለውጥ ማየት
157

)…
ይሞክሩት !
በተሰጠው የሁለት ዓመት ዳታ
መሰረት የድርጅቱ የኣግድም
ትንተና ከውን !
158

ABC CORPORATION
Comparative Balance Sheets
December 31, 2020 and 2019
I
2020 2019 A
Assets
Current assets:
Cash 12,000
$ 23,500
$
Accounts receivable, net 60,000 40,000
Inventory 80,000 100,000
Prepaid expenses 3,000 1,200
Total current assets 155,000 164,700
Property and equipment:
Land 40,000 40,000
Buildings and equipment, net 120,000 85,000
Total property and equipment 160,000 125,000
Total assets 303,000
$ 23,500
$
159

 የብር መጠን ለውጥ ለማስላት 2020 ከ 2019 አንጻር
ለማስላት፡
ለውጥ =
–
)…
160

ለውጡን በመቶኛ ለማስላት
=
I) Horizontal Analysis ( የ አግድም ትንተና )…
161

ABC CORPORATION
December 31,2020 and 2019
Increase (Decrease)
2020 2019 Amount %
Assets
Current assets:
Cash 12,000
$ 23,500
$ (11,500)
$
Inventory 80,000 100,000
Land 40,000 40,000
$ 289,700
$
$12,000 – $23,500 = $(11,500)
)…
162

Increase (Decrease)
2020 2019 Amount %
Assets
Current assets:
Cash 12,000
$ 23,500
$ (11,500)
$ (48.9)
Inventory 80,000 100,000
Land 40,000 40,000
$ 289,700
$
($11,500 ÷ $23,500) × 100% = 48.9%
)…
163

ABC CORPORATION
Increase (Decrease)
2020 2019 Amount %
Assets
Current assets:
Cash 12,000
$ 23,500
$ (11,500)
$ (48.9)
Accounts receivable, net 60,000 40,000 20,000 50.0
Inventory 80,000 100,000 (20,000) (20.0)
Prepaid expenses 3,000 1,200 1,800 150.0
Total current assets 155,000 164,700 (9,700) (5.9)
Land 40,000 40,000 - 0.0
Buildings and equipment, net 120,000 85,000 35,000 41.2
Total property and equipment 160,000 125,000 35,000 28.0
$ 289,700
$ 25,300
$ 8.7
)…
164

)…
165

ABC CORPORATION
Increase (Decrease)
2020 2019 Amount %
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 67,000
$ 44,000
$ 23,000
$ 52.3
Notes payable 3,000 6,000 (3,000) (50.0)
Total current liabilities 70,000 50,000 20,000 40.0
Long-term liabilities:
Bonds payable, 8% 75,000 80,000 (5,000) (6.3)
Total liabilities 145,000 130,000 15,000 11.5
Stockholders' equity:
Preferred stock 20,000 20,000 - 0.0
Common stock 60,000 60,000 - 0.0
Additional paid-in capital 10,000 10,000 - 0.0
Total paid-in capital 90,000 90,000 - 0.0
Retained earnings 80,000 69,700 10,300 14.8
Total stockholders' equity 170,000 159,700 10,300 6.4
Total liabilities and stockholders' equity 315,000
$ 289,700
$ 25,300
$ 8.7
)…
166

)…
167

ABC CORPORATION
Comparative Income Statements
For the Years Ended December 31, 2020 and 2019
Increase (Decrease)
20120 2019 Amount %
Net sales 520,000
$ 480,000
$ 40,000
$ 8.3
Cost of goods sold 360,000 315,000 45,000 14.3
Gross margin 160,000 165,000 (5,000) (3.0)
Operating expenses 128,600 126,000 2,600 2.1
Net operating income 31,400 39,000 (7,600) (19.5)
Interest expense 6,400 7,000 (600) (8.6)
Net income before taxes 25,000 32,000 (7,000) (21.9)
Less income taxes (30%) 7,500 9,600 (2,100) (21.9)
Net income 17,500
$ 22,400
$ (4,900)
$ (21.9)
)…
168

ABC CORPORATION
Increase (Decrease)
2020 2019 Amount %
Net sales 520,000
$ 480,000
$ 40,000
$ 8.3
Gross margin 160,000 165,000 (5,000) (3.0)
Net income 17,500
$ 22,400
$ (4,900)
$ (21.9)
Sales increased by 8.3% while net income decreased by 21.9%.
)…
169

ABC CORPORATION
Increase (Decrease)
2020 2019 Amount %
Net sales 520,000
$ 480,000
$ 40,000
$ 8.3
Gross margin 160,000 165,000 (5,000) (3.0)
Net income 17,500
$ 22,400
$ (4,900)
$ (21.9)
There were increases in both cost of goods sold (14.3%) and operating
expenses (2.1%). These increased costs more than offset the increase in
sales, yielding an overall decrease in net income.
2) Horizontal Analysis ( የ አግድም ትንተና
)
170

II) Vertical Analysis ( ሰያፍ ትንተና )
…
Vertical Analysis – It is a method of financial analysis in
which each line item is listed as a percentage of a base
figure within the statement.
 Thus, line items on an income statement can be stated
as a percentage of sales/revenue, while line items on a
balance sheet can be stated as a percentage of total
assets .
 የአንድን የሂሳብ መግለጫ ኢለመንቶችን እርስ በራስ
በማወዳደር ያሉበትን ሁነታ ማሰስ ፡፡ ለምሳሌ፡ የአመቱ
የተጣራ ትርፍ ከ ኣጠቃላይ ሽያጭ ኣንጻር
171

Sample Company
Balance Sheet (Assets)
At December 31, 2020 and 2019
% of Total Assets
2020 2019 2020 2019
Cash 82,000
$ 30,000
$ 17% 8%
Accts. Rec. 120,000 100,000 25% 26%
Inventory 87,000 82,000 18% 21%
Land 101,000 90,000 21% 23%
Equipment 110,000 100,000 23% 26%
Accum. Depr. (17,000) (15,000) -4% -4%
Total 483,000
$ 387,000
$ 100% 100%
$82,000 ÷ $483,000 = 17% rounded
$30,000 ÷ $387,000 = 8% rounded
II) Vertical Analysis ( ሰያፍ ትንተና ) …
172

Sample Company
Balance Sheet (Assets)
% of Total Assets
2020 2019 2020 2019
Cash 82,000
$ 30,000
$ 17% 8%
Accts. Rec. 120,000 100,000 25% 26%
Inventory 87,000 82,000 18% 21%
Land 101,000 90,000 21% 23%
Equipment 110,000 100,000 23% 26%
Accum. Depr. (17,000) (15,000) -4% -4%
Total 483,000
$ 387,000
$ 100% 100%
II) Vertical Analysis ( ሰያፍ ትንተና ) …
173

Sample Company
Balance Sheet (Liabilities & Stockholders' Equity)
% of Total Assets
2020 2019 2020 2019
Acts. Payable 76,000
$ 60,000
$ 16% 16%
Wages Payable 33,000 17,000 7% 4%
Notes Payable 50,000 50,000 10% 13%
Common Stock 170,000 160,000 35% 41%
Retained Earnings 154,000 100,000 32% 26%
Total 483,000
$ 387,000
$ 100% 100%
$76,000 ÷ $483,000 = 16% rounded
2) Vertical Analysis ( ሰያፍ ትንተና ) …
174

III) Ratio Analysis (ሬሾ /አንፃራዊ ትንተና ) …
Ratio analysis - is an analytical technique that typically
involves a comparison of the relationship between two
financial statement items;
 Ratio analysis - is a powerful tool of financial analysis.
Ratios are more meaningful if there is standard of
measurement or comparison.
 Financial ratios - are used to evaluate the financial
condition and profitability of the firm.
175

ሬሾ በተለያየ መልኩ ሊገለጽ ይችላል:
i. በ ንፅፅር (፡ ) , current ratio of 2:1
ii. በ መቶኛ (%) , profit margin of 2%
iii.በ ዋጋ ( $ ) , EPS of $2.25
III) Ratio Analysis (ሬሾ /አንፃራዊ ትንተና )
…
176

Major Types of Financial Ratios (ዋና ዋና ሬሾ ዓይነቶች
) I) Liquidity Ratios
 የ ገንዘብ ክምችት መለኪያ ሬሾዎች
II) Asset Management/ Activity /Efficiency Ratios
 የ ሃብት አጠቃቀም መለኪያ ሬሾዎች
II) Debt Management Ratios
 የ ብድር አጠቃቀም መለኪያ ሬሾዎች
III) Profitability Ratios
 የ ትርፋማነት መለኪያ ሬሾዎች
3) Ratio Analysis (ሬሾ /አንፃራዊ ትንተና )
…
177

1) Liquidity Ratios (የ ገንዘብ ክምችት መለኪያ
ሬሾዎች)… ….
178
a) Current Ratio:
 It measures the ability of the firm to meet short-term obligations
from its current assets.
 It is a measure of a firm’s short-term solvency.
 Generally, the Current ratio greater than or equal the standard is
desirable.
 Thus it must be 1 or more.

179
b) Quick/Acid Test Ratio :
 It measures an entity's ability to pay its current liabilities by using
its most liquid assets excluding least liquid inventories.
 Generally, Quick ratio greater than or equal to the standard is
desirable.
 Thus its quick ratio must be 1 or more.
1) Liquidity Ratios (የ ገንዘብ ክምችት መለኪያ
ሬሾዎች)

180
a) Inventory Turnover (ITO):
 It measures the average number time per year that an entity
sells or turns over its inventory
 High inventory turnover ratios are taken as a sign of efficient
management of inventory where as low inventory turnover is
a sign of slow moving or obsolete items in inventory.
 Generally, higher ITO is desirable.
2) Asset Management Ratios (የ ሃብት አጠቃቀም መለኪያ
ሬሾዎች )…

181
b) Receivable Turn over (RTO) :
 It tells us the number of times A/R have been turned
over/ turned into cash during the year.
 Generally, RTO greater than or equal to the standard is
desirable.
ሬሾዎች )…

182
c) Average Collection Period (ACP):
 It is called Receivable Turn Over in Days (RTD) or Days
Sales Outstanding.
 It tells us the average number of days that receivables
are outstanding before being collected.
 Generally, a lower ACP is desirable.
ሬሾዎች )…

183
d)Fixed Assets Turnover (FATO)
 It is used to measure how effectively the firm uses its
plant assets in generating sales.
 Generally, FATO greater than or equal to the standard
is desirable.
ሬሾዎች )…

184
f) Total Assets turn over (TATO)
 It shows the firm’s ability in generating sales from all
financial resources committed to total assets.
 Generally, TATO greater than or equal to the standard
is desirable.
ሬሾዎች )

3) Debt Management Ratios (የ ብድር አጠቃቀም መለኪያ
ሬሾዎች)…
185
a) Debt (D/A) Ratio :
 It measures the extent to which the firm is using borrowed
money.
 Generally, creditors would like a lower debt ratio.

186
4) Profitability Ratios (የ ትርፋማነት መለኪያ
ሬሾዎች)
a) Gross Profit Margin (GPM)Ratio :
 It reflects management’s effectiveness in pricing policy,
generating sales and production efficiency.
 Generally, gross profit margin ratio greater than or equal
to the standard is desirable.

187
b) Net Profit Margin (NPM) Ratio :
 It indicates management’s efficiency in manufacturing,
administering, selling, financing, pricing and tax
management.
 Generally, net profit margin ratio greater than or equal to
the standard is desirable.
ሬሾዎች)

188
c) Return on Investment (ROI) :
 It is also called Return on Assets (ROA) .
 It measures the amount of profit generated on
investments in assets .
 Generally, a higher ROA is desirable.
ሬሾዎች)

189
d) Return of Equity (ROE) :
 It is also called the Return on Stockholders’ Equity/ Return
on Net Worth.
 It measures the return earned by stockholders’ on their
investment and serves as an indicator of management
performance.
 Generally, a higher ROE is desirable
4) Profitability Ratios (የ ትርፋማነት መለኪያ ሬሾዎች)

190
ሬሾዎች)
e) Earnings per Share (EPS):
 It simply shows the profitability of the firm on a per
share basis during the reporting period.
 Generally, higher EPS is desirable.

191
ሬሾዎች)
f) Dividend per Share (DPS) :
 It represents the Birr amount of cash dividends a
corporation paid on each share of its common stock
outstanding during the reporting period.
 Generally, higher DPS is desirable.

1. የአንድ ቢዝነስ ህልውና የጀርባ ኣጥንት ፋይናንስ ነው፡፡
2. ይህ ፋይናንስ በቀጣይነት ለማግኘት አግባብነት ያለው
ኣካውንቲንግ ሲስተም መዘርጋት ግዴታ ነው፡፡
3. ይህ ሲሆን ቢዝነሱ ትርፉንና ኪሳራዉን በአግባቡ እየመዘገበ
እንዲሁም ያለበትን ደረጃ ገምግሞ አስፈላጊውን እርምት በግዜ
እንዲወስድ ይረዳዋል፡፡
4. ከዚህም በተጨማሪ እዳዉን ለመክፈልም በቂ ኣቅም ይኖረዋል፡፡
5. አበዳሪዎችም በቀጣይነት ፋይናንስ ለማድረግ ዝግጁ ይሆናሉ፡፡
ማጠቃለያ
192

የሥልጠናዉ መጨረሻ
አመሰግናለሁ!
194

Development Bank of Ethiopia Accounting Methods pp.ppt

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Development Bank of Ethiopia Accounting Methods pp.ppt

Notes de l'éditeur