Addis Ababa University
Department of Accounting and Finance
Accounting Software Application
Simplified Project for Peachtree and Quick Books Project
2023
a. Setup a company on the basis of the following data:
Description
Company Name
Company Address
Business Type
Chart of Accounts
Accounting Method
Posting Method
Accounting Periods
Information
“Your Name” IFRS Computer Trading
6th Kilo
Share Company
Build your own
Accrual
Real-Time
12 Monthly Accounting Periods
Fiscal Year begins January 2023
First month of data entry October [Period 10]
Note: Create a User using your name as User ID and with Your own password. Then activate the audit trial
by closing and reopening your company before you proceed to instruction “b”.
b. The following General Ledger Trial Balance was prepared in accordance with GAAP as at September
30, 2023 end of the period before the transition date.
Acc. ID
1110
1140
1141
1142
1143
1143C
1144
1144C
1145
1145C
1146
1146C
2110
2115
2120
3110
3115
3220
4110
5110
6110
6120
Account Description
Cash In Bank
Account Receivables
Allowance for Uncollectible
Inventory
Building
Accumulated Depreciation-Bu
Machinery
Accumulated Depreciation-Ma
Computers
Accumulated Depreciation-Co
Truck
Accumulated Depreciation-T
Accounts Payable
Income Tax Payables
Rent Payable
Common Stock
Dividend
Retained Earnings
Sales and Other Income
Cost of Goods Sold
Rent Expense
Miscellaneous Expense
TOTAL
Account Type
Cash
Account Receivable
Account Receivable*
Inventory
Fixed Asset
Accumulated Depreciation
Fixed Asset
Accumulated Depreciation
Fixed Asset
Accumulated Depreciation
Fixed Asset
Accumulated Depreciation
Accounts Payable
Other Current Liability
Other Current Liability
Equity-Doesn’t Close
Equity-Gets closed
Equity-Retained Earnings
Income
Cost of Sales
Expenses
Expenses
Debit Amt
10,000.00
16,800.00
Credit Amt
3,100.00
11,000.00
105,000.00
40,250.00
120,000.00
5,000.00
45,000.00
0.00
180,000.00
487,800.00
180,000.00
6,000.00
500.00
8,333.00
192,000.00
0.00
52,617.00
0.00
0.00
0.00
0.00
487,800.00
Page 1 of 8
In relation to the General Ledger Trial Balance, carefully review the following accounting practices of the
company under the previous system. In such endeavor, for each element
i. Identify the IFRS policy applicable/determined for each elements of financial statements,
a. IFRS SCOPING
ii. Identify the Gaps between such practices and the IFRS policy requirements.
a. IFRS Policy
GAAP practice(policy) OK Mi Mx
iii. Analyze the impact of the policies adopted on each item
Mx : Close the Gap Financial Figure
iv. Reinstate the company’s General Ledger Chart of accounts
v. Enter the General Ledger Beginning Balances and
vi. Prepare the opening IFRS statement of Financial Position as at September 30, 2023.
Innocent until proven guilty
1. Cash and Cash Equivalents
The initial and subsequent treatment of cash and its equivalents decided to be done as per IFRS 9.
Accordingly, the measurement model is fair value through profit or loss.
2. Trade and Other Receivables
The initial and subsequent treatment of Trade receivables and their impairment losses will be as per IFRS
9. The measurement model to be used for trade receivable is Amortized Cost and the expected loss model
for impairment losses.
The Expected Credit Loss is estimated to be ETB 3,100 using the Provisional matrix in IFRS 9 and it was
properly accounted in the existing system using the following schedule:
Age Interval (Based on Invoice Date)
0-10 days
11 to-15 days
15 to 20 days
>20 days
Life time PD %
5
10
15
35
Loss Given Default
100%
100%
100%
100%
3. Inventory
The initial and subsequent treatment of Inventory is to be made as per IAS 2 using the Lower of Cost or
Net Realizable Value model.
The company currently uses FIFO and LIFO for items M01 and M02, respectively.
The management decides to use FIFO for Item M01 and Average for Item M02 as LIFO is prohibited
under IFRS. In changing the LIFO cost formula to Average the company recomputed the item’s cost as if
the Average cost formula had been used from the beginning and decides that the average cost would have
been 5 birr more than the current GAAP balance. (See the inventory master in section e below.) The
estimated selling costs less costs to complete and to sell were as follows on the transition date.
ITEM
EST.
SELLING COST
TO COST TO SELL
PRICE
COMPLETE
M01
400
0
75
M02
55
0
45
4. Fixed Assets
Property Plant and Equipment under the company’s own use are treated as per IAS 16 and the company
opted to use the cost model. In cases where asset impairment are suspected the company performs
Page 2 of 8
impairment tests as per IAS 36. Properties held for rental purposes are treated as per IAS 40 Investment
property. The company opted to use the fair value model for its IP.
Building
The balance shown under Building (Refer section b) is composed of two Buildings. Each was acquired at
cost of Br. 52,500 with a useful life of 5 years and zero salvage value. The straight line depreciation method
was used for both.
Building 1 is held for rental purposes and Building 2 is for company’s own use.
Building 1 was in a good condition and its fair value on the transition date was Br. 80,000. The
management decides to use the fair value model for this building. (Think about the initial and subsequent
treatment if the cost model was opted by management)
Building 2 was in a poor physical condition. As a result, the management determines that impairment test
must be conducted. On the transition date the asset’s value in use was estimated to be Br. 29,000 and its fair
value less costs to sell to be Br. 30,000 to determine its Recoverable Amount. For depreciation purpose,
Building 2’s carrying amount will be separated into its two Major Components: B2C1 Crane and B2C2
Structure
B2C1 (the Crane) is expected to produce 500 tons of loading. The cost model is opted for this component.
The Units of Production depreciation method is determined to be used.
B2C2 (the structure) is expected to be used uniformly over its two year remaining useful life. The cost
model is opted for this component. The straight line depreciation method is determined for use. The
revised cost of Building 2 is decided to be apportioned in a ratio of 4:1 for the two components,
respectively.
Land: Right of Use Asset
The Company has a land acquired through a free hold land use right. Had the company acquired the land
through lease it would have paid Br 30,329 down payment and would agree for an annual lease payment of
Br. 10,000 payable at year end. The incremental borrowing rate of the company is 10%.The Land (Right of
Use) was not recorded in GAAP but the rental expenses were, as land can not be legally owned in Ethiopia.
The straight line depreciation method is to be used to depreciate the land (ROU Asset)
Machinery
The company has a machinery acquired at a cost of Br. 120,000. The Building was recorded and
depreciated based on straight line method over a 20 years useful life up to the transition date. However, on
the transition date the machine’s original cost was studied and divided in to three major components:
M1C1: Structure. Its cost is Br. 60,000, its useful life is 50 years and it has no residual value. The straight
line method is determined for this component.
M1C2: Roof. The cost of Roof was assessed to be Br. 40,000. The Roof has an estimated life of 15 years.
The straight line depreciation method is determined for this component.
M1C3: Finishing and others. This has a cost of Br. 20,000 and useful life of 5 years.
5. Intangible Asset: Computer and Software
The company accounts intangible assets as per IAS 38 Intangible Asset. The cost model is used to account
for intangible assets.
In the adoption of IFRS, the company acquired 5 PCs for Br. 5,000 each on the transition date and
implemented a networked accounting system using Sage 50 Accounting Software for Br. 15,000 and paid
Br. 5,000 direct implementation cost. The company recorded the total cost as Computers.
However, under IFRS the management decided that the Computer hardware is to be carried under the cost
model. It is to be depreciated over 5 years using declining balance method with no residual value. No major
components were identified for it. The software has an estimated useful life of 10 years. The company
chooses the cost model and straight line depreciation method with no residual value.
6. Fully Depreciated Asset: Truck
The fixed asset includes a Truck acquired on January 1, 2005 at Br. 180,000. The asset was fully
depreciated over a 5 years useful life and held at Br. 1 on the transition date. The car is still in the service of
Page 3 of 8
the company. The attempt to revalue the car was unsuccessful as the company manufacturing the car is
closed and due to its uniqueness. As a result, the management estimated that the car will serve the coming 5
years on the transition date. The cost model with straight line depreciation is used for the Truck.
Others
7. The company chooses the Amortized Cost Model for its Trade Payables and leases based on IFRS
9.This has little impact.
8. The company uses IFRS 15 to account for its sales and other income.
9. The company is a first time adopter. Due to this,IFRS 1 First time adoption of IFRS has to be strictly
followed in implementing the Accounting policies.
Subsidiary Ledgers
The following subsidiary ledger accounts were presented before adjustments made as per IFRS. Carefully
consider for any adjustments and enter the customer, inventory and fixed asset ledgers.
c. Maintain the following Customers and enter their beginning balances as at September 30, 2023:
CUSTOMER ID
C01
C02
NAME
K
B
ADDRESS
SARIS
PIAZZA
51
52
BEGINNING BALANCE DATA
INV#
Balance
Br. 7,300
9,500
d. Maintain the following Vendors and enter their beginning balances as at September 30, 2023:
VENDOR ID
V01
V02
NAME
E
P
ADDRESS
BOLE
MEXICO
BEGINNING BALANCE DATA
INV#
Balance
91
Br. 3,600
92
2,400
e. Maintain the following inventory and enter their beginning balances as at September 30, 2023
Item
Id.
M01
M02
f.
Item
Class
STOCK
STOCK
Item
Des.
B
H
Unit
Measure
Carton
Each
Cost
Method
FIFO
LIFO
BEGINNING BALANCE DATA
Quantity
Cost/
TOTAL
On Hand
Price
Cost
35
Br.200/400
Br. 7,000
200
20/55
4,000
Property, Plant and Equipment
Maintain the following fixed assets and enter their beginning balances as at September 30, 2023
Fixed
Description Serial Cost
Salvage Economic
Date
Depreciation
Asset ID
No.
Value
Life (Yrs) Acquired
Method
In
Service
PPE-01
Building 1 1B1A
52,500
0
5
11/25/16 12/1/16
SLM
PPE-02
Building 2 1B1B
52,500
0
5
11/25/16 12/1/16
SLM
PPE-03
Machinery 1M1A 120,000
0
20
2/12/15
1/1/16
SLM
PPE-04
Computer 1C1A
9,000
0
5
10/16/16 10/31/16
DDBM
PPE-05
Computer 1C1B
9,000
0
5
10/16/16 10/31/16
DDBM
PPE-06
Computer 1C1C
9,000
0
5
10/16/16 10/31/16
DDBM
PPE-07
Computer 1C1D
9,000
0
5
10/16/16 10/31/16
DDBM
PPE-08
Computer 1C1E
9,000
0
5
10/16/16 10/31/16
DDBM
PPE-09
Truck
1T1A 180,000
0
5
1/1/05
1/1/05
SLM
Life
to
Date
Deprn.
20,125
20,125
5,000
0
0
0
0
0
180,000
Page 4 of 8
Considering the above points the following General Ledger Accounts are designed for the company and the
GL balances will have the following revised balances.
Acc. ID
1110
1140
1141
1150
1151
1210
1210-C1
1210-C2
1220
1220-C1
1220-C2
1230
1230-C1
1230-C2
1240
1240-C1
1240-C2
1250
1250-C1
1250-C2
1310
1410
2110
2115
2120
2220
3110
3115
3220
3230
4110
5110
6110
6120
6130
Total
Account Description
Cash and Cash Equivalents
Trade Receivables
Provision for Doubtful Accounts
Inventory
Provision for Stock Impairment
PPE: Building
Accu. Depreciation-Building
Accu. Impairment-Building
Computers
Accumulated Depreciation-Co
Accumulated Impairment Loss-C
Truck
Accumulated Depreciation-T
Accumulated Impairment Loss-T
Machineries
Accumulated Depreciation-M
Accumulated Impairment Loss-M
Land: Right of Use
Accumulated Depreciation-L
Accumulated Impairment Loss-L
Investment Property: Building
Intangible Asset: Software
Accounts Payable
Income Tax Payables
Rent Payable
Lease Payable: Non-Current
Common Stock
Dividend
Retained Earnings
Reserve for Transition to IFRS
Sales and Other Income
Cost of Goods Sold
Depreciation Expense
Interest Expense
Miscellaneous Expense
Account Type
Cash
Account Receivable
Account Receivable*
Inventory*
Inventory
Fixed Asset
Accu. Deprn.
Accu. Deprn.
Fixed Asset
Accu. Deprn.
Accu. Deprn.
Fixed Asset
Accu. Deprn.
Accu. Deprn.
Fixed Asset
Accu. Deprn.
Accu. Deprn.
Fixed Asset
Accu. Deprn.
Accu. Deprn.
Fixed Asset
Other Asset
Accounts Payable
Other Current Liability
Other Current Liability
Long-term Liability
Equity-Doesn’t Close
Equity-Gets closed
Equity-Retained Earnings
Equity-Doesn’t Close
Income
Cost of Sales
Expenses
Expenses
Expenses
Debit Amt
10,000.00
16,800.00
Credit Amt
3,100.00
12,000.00
3,000
52,500.00
20,125,00
2,375.00
25,000.00
0.00
0.00
180,000.00
125,291.00
0.00
120,000.00
6,555.00
0.00
130,000.00
6,140.00
0.00
80,000.00
20,000.00
646,300.00
6,000.00
500.00
8,333.00
99,570.00
192,000.00
0.00
52,617.00
130,819.00
0.00
0.00
0.00
0.00
0.00
646,300.00
Page 5 of 8
Subsidiary Ledgers
The following subsidiary ledger accounts were presented before adjustments made as per IFRS. Carefully
consider for any adjustments and enter the customer, inventory and fixed asset ledgers.
Maintain the following inventory and enter their beginning balances as at September 30, 2023:
Item
Id.
M01
M02
Item
Class
STOCK
STOCK
Item
Des.
B
H
Unit
Measure
Carton
Each
Cost
Method
FIFO
Average
BEGINNING BALANCE DATA
Quantity
Cost/
TOTAL
On Hand
Price
Cost
35
Br.200/400
Br. 7,000
200
25/55
5,000
g. Property, Plant and Equipment
Maintain the following fixed assets and enter their beginning balances as at September 30, 2023
Fixed
Asset ID
Description
Serial
No.
Cost
IP-01
PPE-0101
PPE-0102
PPE-0201
PPE-0202
PPE-0203
PPE-04
PPE-05
PPE-06
PPE-07
PPE-08
PPE-09
PPE-10
IA-01
Machine 1
1M1A
M2Component1 1M2C1
Salvage Economic Date
Value Life (Yrs) Acquired In
Service
11/25/16 12/1/16
80,000
0
5
0
500 ton 11/25/16 12/1/16
42,000
Depreciation Life to
Method
Date
Deprn.
UOP
16,100
M2Component2 1M2C2
10,500
0
5
11/25/16
12/1/16
SLM
4,025
475
Structure
1B1A1
60,000
0
50
2/12/15
1/1/16
SLM
1,000
0
Roof
1B1A2
40,000
0
15
2/12/15
1/1/16
SLM
2,222
0
Finishing
1B1A3
20,000
0
5
2/12/15
1/1/16
SLM
3,333
0
Computer
Computer
Computer
Computer
Computer
Truck
Land:ROU
Software
1C1A
1C1B
1C1C
1C1D
1C1E
1T1A
1L1
1S1
5,000
5,000
5,000
5,000
5,000
180,000
130,000
20,000
0
0
0
0
0
0
0
0
5
5
5
5
5
5
60
5
10/16/16
10/16/16
10/16/16
10/16/16
10/16/16
1/1/05
1/1/14
10/16/16
10/31/16
10/31/16
10/31/16
10/31/16
10/31/16
1/1/05
1/1/14
10/31/16
DDBM
DDBM
DDBM
DDBM
DDBM
SLM
SLM
SLM
0
0
0
0
0
180,000
6,140
0
0
0
0
0
0
0
0
0
h. Backup and Restore
Take a backup of your company data files on a flash or D drive and restore it. Delete the duplicated
restored company data file.
Page 6 of 8
Accu.
Impa.
Loss
1,900
i.
Transactions and Events
j.
Q1 has been issued to C01 for sales of 130 units of M01.
Q1 issued to C01 has been accepted and sales order S1 has been issued.
Sales order S2 has been issued to C02 for sales of 30 units of M01.
All of the items indicated on Q1 and S1 are delivered to C01 and CSI1 is prepared.
CSI3 is prepared for sales of 30 units of M01 and 50 units of M02 to customer C02.
CR1 is issued to C01 for full settlement of CSI1. DT 01 R01
Issued 200 shares of common stock as dividend for the year amounting 30,000. M01
The beginning balance owed from CO1 has been received in full CR2, DT 02 and R02
Adjusting Entries:
1. PPE-IP: Depreciation/ Revaluation
2. Inventory: IAS 2: Lower of Cost or NRV
3. Account Receivable: IFRS 9 Allowance for Uncollectible
4. Annual Leave: IAS 19: Accrued Leave Payable
5. Severance: IAS 19: Accrued Severance Payable
6. Provision for litigation: IAS 37: Provision for Litigation
7. Differed Tax: IAS 12: Differed Tax Liability
During January Machine 2C1 (UOP) and C2 (SL 2yrs) produced 10 tons of paper and the fair value of
Machine 1 (IP: Fair value Model) was revalued to Br. 79,000. M02
Bank Reconciliation
Record the transactions below related to the given date of the month of October 2023
Date
Transactions [Source Documents: GRN Goods Receiving Note, CPV-Cash Payment Voucher, Q-Quote,
P-Purchase Order, S-Sales Order, CSI-Credit Sales Invoice, CR- Cash Receipt, M-Memo, DT-Deposit
Ticket, R-Reference]
1.
Issued purchase order P1 to V01 for 20 units of M 01 @ Birr 250
4.
All of the items ordered from V01 through P1 have been received GRN1 is prepared.
8.
150 units of M01 were purchased from V03 and GRN2 is prepared.
10.
GRN1 has been paid in full to V01.CPV 001
11.
The beginning balance owed to V02 has been paid in half.CPV 002
15.
Electric Bill for the month amounting to Br. 150.00 has been paid.CPV 003.
17.
Br. 2,000 is paid in advance to V02 for Purchase of Merchandise.CPV 004.
21.
23.
24.
25.
27.
28.
29.
29.
31.
Based on the bank statement given below prepare bank reconciliation as at October 31, 2023:
Commercial Bank of Ethiopia
Bank Statement
For the month ended October 31, 2023
Balance Brought Forward From the month ended September 30, 2023
Deposits and other Credits
Withdrawals and other Debits
DT01
52,000.00 CPV 001
DT02
7,300.00 CPV 002
Foreign Revenues Collected
200.00 CPV 003
by the bank
CPV 004
Bank Service Charge
Total
59,500.00 Total
Balance Carried Forward to the month of October 31, 2023
10,000.00
5,000.00
1,200.00
150.00
2,000.00
500.00
8,850.00
60,650.00
Page 7 of 8
Record the transactions below related to the given date of the month of November 2023
Date
Transactions [Source Documents: GRN Goods Receiving Note, CPV-Cash Payment Voucher, Q-Quote,
P-Purchase Order, S-Sales Order, CSI-Credit Sales Invoice, CR- Cash Receipt, M-Memo, DT-Deposit
Ticket, R-Reference]
2.
6.
22.
26.
30.
Issued purchase order P2 to V02 for 200 units of M 02 @ Birr 30
100 units of M02 ordered through P2 from V02 have been received and GRN 2 is prepared
Q2 has been issued to C02 for sales of 100 units of M02.
Q2 issued to C02 has been accepted and all the items are delivered to the Customer, CSI2
Adjusting Entries:
1. PPE-IP: Depreciation/ Revaluation
2. Inventory: IAS 2: Lower of Cost or NRV
3. Account Receivable: IFRS 9 Allowance for Uncollectible
4. Annual Leave: IAS 19: Accrued Leave Payable
5. Severance: IAS 19: Accrued Severance Payable
6. Provision for litigation: IAS 37: Provision for Litigation
7. Differed Tax: IAS 12: Differed Tax Liability
Based on the bank statement given below prepare bank reconciliation as at November 30
Commercial Bank of Ethiopia
Bank Statement
For the month ended November 30,2023
Balance Brought Forward From the month ended October 31, 2023
Deposits and other Credits
Withdrawals and other Debits
Foreign Revenues Collected
2,000.00 Bank Service Charge
by the bank
Total
2,000.00 Total
Balance Carried Forward to the month of November 30, 2023
60,650.00
250.00
250.00
62,400.00
Page 8 of 8