CERTIFICATE LEVEL

Subject Fundamentals of Financial Accounting (BA3)

Mallik De Silva
Lecturer FCMA, MSc, ACA, LTCL, Dip. IFRS (ACCA)

Module BA3 M Kit Chapter 10

Code BA3/MS/20
 Chapter 10

Accounting for Salaries and Wages

Questions 116
$
Gross Salary 20,000
Employer’s NI 5,000
Employees NI 3,000
PAYE Tax 2,000

a) What is the wages expense?

b) What is the net salary?

Questions 117

Ruban is an employee of wisdom International who earns as weekly gross wage of

$780.50.

He is liable to pay National Insurance contribution of 11% of his earnings and Employer’s
National Insurance Contributions are at 14%

Income tax is charged at 20% on earnings above $110.

What are the correct ledger entries?

Debit Credit
A. Wages Expense $560.50 Wages Payable $560.50
NI Expense $109.27 PAYE& NI Payable $109.27

B. Wages Expense $780.50 Wages Payable $780.50

NI Expense $109.27 PAYE & NI Payable $109.27
Wages Payable $219.95 PAYE & NI Payable $219.95

C. Wages Payable $560.55 Wages Expense $560.55

NI Expense $85.85 PAYE & NI Payable $85.85

D. Wages Payable $780.50 Wages Expense $780.50

PAYE & NI Payable $109.27 NI Expense $109.27
PAYE & NI Payable $219.95 Wages Payable $219.95

BA3 Nov. 2020 – M KIT – Mallik De Silva 1

 Question 118

Rover industries paid net salaries of $10,000 during April 2013. PAYE Tax & Employees
Contribution to national insurance amounted to $4,000. Employer’s national insurance
amounted to $3,000 & the employer also contributed $2,000 towards a staff pension
scheme.

What is the salaries & wages cost for April 2013?

Question 119

The total cost of salaries charged to the profit and loss account is

A. the total gross salaries plus employer's national insurance contributions.

B. the total gross salaries.

C. the total net salaries.

D. the total net salaries plus employer's national insurance contributions.

Question 120

B is a builder with a staff of ten employees. In April 2001, he paid the following amounts:

net salaries after tax and national insurance £14,000

tax and employees’ national insurance for March 2001 £5,000
employer’s national insurance for March 2001 £1,400

He owes the following amounts in respect of tax and national insurance for April 2001:

tax and employees’ national insurance £6,000

employer’s national insurance £1,500

The correct expense for employee costs to be shown in the profit and loss account for April 2001
is

A £19,000. B £20,000. C £20,400. D £21,500.

BA3 Nov. 2020 – M KIT – Mallik De Silva 2

 Question 121

S is employed by T Ltd. His pay details for January and February are as follows:

January: Gross salary $2,000 Tax $500 National insurance $100 Net pay $1,400
February: Gross salary $2,200 Tax $550 National insurance $110 Net pay $1,540

Tax and national insurance are payable to the government one month after they are
deducted from employees’ salaries.

How much cash did T Ltd pay out in February in connection with S’s wages?

A $2,000 B $2,060 C $2,140 D $2,200

Question 122

SAD plc paid £240,000 in net wages to its employees in August 2002. Employees’ tax was
£24,000,employees’ national insurance was £12,000 and employer’s national insurance
was £14,000.Employees had contributed £6,000 to a pension scheme and had voluntarily
asked for £3,000 to be deducted for charitable giving.

The amount to be charged to the profit and loss account in August 2002 for wages is

A. £285,000 B. £293,000 C. £296,000 D. £299,000

Scenario for Q 123 to 125

An employee worked 50 hours in week 30. The employee is paid at the standard rate of $10 per
hour for the first 40 hours, and any additional hours are paid at standard rate plus 20%. The
employee is liable to pay income tax on total earnings at the rate of 20% on gross earnings in
excess of $1,000. Both the employee and employer are obliged to pay social security tax at the
rate of 15% on gross earnings. In addition, the employee contributed $10 per week to a savings
scheme which was deducted from his earnings by his employer.

Question 123

What was the net cash payment made to the employee for week 30?

Question 124

What was the total amount payable to the tax authority for income tax and social security
tax?

Question 125

What’s the salaries cost to be expensed to the profit or loss?

BA3 Nov. 2020 – M KIT – Mallik De Silva 3