Reference no: EM132926892

Question - Payroll Accounting and the Ethiopian Tax System - ABC and XYZ are VAT registered sole proprietorship companies in Ethiopia. ABC is manufacturing company while XYZ is a wholesaler. ABC company purchase raw materials from VAT registered supplier with 500,000 birr including VAT and resold the finished product after processing to XYZ Company for birr 650,000 before VAT. XYZ Company later on resold the product to retailers for birr 843,334 VAT inclusive.

At the end of the fiscal year Sene 30, 2012 E.C other expenses and employment income tax paid are birr 100,000 and birr 50,000 for ABC and birr 80,000 and birr 60,000 for XYZ company respectively. Assume any purchase and sales transaction comes out with sole proprietorship and both companies are classified under Category B.

Based on the above information:

1. Prepare Income Statement and show the Net Income before tax as well as after tax for both companies.

2. Calculate Direct Tax for both companies.

3. Calculate Indirect Tax for both companies.