Department of Accounting Education

Mabini Street, Tagum City

Davao del Norte
Telefax: (084) 655-9591, Local 116

Week 13-14: Unit Learning Outcomes (ULO): At the end of the unit, you are expected to
a. Prepare adjusting entries, closing entries and reversing entries for
merchandising concern business operation, understand and analyze the
worksheet, prepare financial statements and post-closing trial balance;
b. Understand, describe, prepare and analyze general journals, special journals,
general ledger and subsidiary ledger.
c. Analyze and prepare necessary documents and reports for payroll accounting.

Big Picture in Focus: ULOa. Prepare adjusting entries, closing entries and
reversing entries for merchandising concern business operation, understand and
analyze the worksheet, prepare financial statements and post-closing trial balance;

Metalanguage
For you to demonstrate ULOa, you will need operational understanding of the terms
enumerated below.

Adjusting Entry to record and correct the revenue and expenditure account in the income
statement for the relevance and completeness of the information.

Essential Knowledge
To perform the aforesaid big picture (unit learning outcomes), you need to fully understand the
following essential knowledge laid down in the succeeding pages. Please note that you are not
limited to exclusively refer to these resources. Thus, you are expected to utilize other books,
research articles and other resources that are available in the university’s library e.g. ebrary,
search.proquest.com etc., and even online tutorial websites.

1. ADJUSTMENTS ARE JOURNALIZED AND POSTED

The company need to do physical count if the company has no perpetual record of the costs of
sales. This method will definitely the only way to obtain the costs of ending inventory.

The adjusting entries that are done in the service concern business will be the same except that
the merchandising concern business needs this additional adjusting entry:

a. Adjusting entry for beginning inventory

The entry would be:

Income Summary XXXXXX
Merchandise Inventory, Beginning XXXXXX

1
 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

b. Adjusting entry for beginning inventory

The entry would be:

Merchandise Inventory, Ending XXXXXX
Income Summary XXXXXX

c. The 40% of the 90,000.00 unearned survey revenue is earned during the period.

The entry would be:

Unearned Survey Revenue (90,000*.40) 36,000.00
Survey Revenue 36,000.00
To adjust the unearned survey revenue

d. The salaries still unpaid is worth 190,000.00

The entry would be:

Salaries Expense 190,000.00
Accrued Salaries Expense 190,000.00
To record the unpaid salaries.

e. Interest on the note of 650,000.00 is 12%.

The entry would be:

Interest Expense (650,000*.12) 78,000.00
Accrued Interest Expense 78,000.00
To record the unpaid interest.

2. CLOSING ENTRIES

This is the process of bringing the nominal or temporary accounts to zero. The temporary
accounts that are closed are the income, expenses and withdrawal. The closing entry for
beginning inventory and ending inventory are the same with the adjusting entry and the closing
entry for other accounts will be the same with the service concern business operation. The steps
of closing accounts is the following:
1. Close the income accounts
2. Close the expense accounts
3. Close the income summary account
4. Close the withdrawal account

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

3. WORKSHEET, POST-CLOSING TRIAL BALANCE AND THE FINANCIAL

STATEMENTS

Worksheet
The difference for the worksheet of merchandising from the service operation is that the
worksheet of the merchandise beginning inventory will be extended to the debit column of the
income statement and the merchandise ending inventory will be extended to the credit column
of the income statement, then finally, the merchandise ending inventory will be entered to the
debit column of the balance sheet.

Post-Closing Trial Balance

To ensure that error is not existent after the posting of adjusting and closing entries. This is the
final trial balance and presents only the permanent accounts.

The Financial Statements

The financial statement will be drafted the same as the service concern business but the
income statement will follow the format below.

Sample Format for Income Statement:

Gross Sales XXXXXX

Less: Sales Returns and Allowances xxxxxx
Sales Discounts xxxxxx XXXXXX
Net Sales XXXXXX
Less: Cost of Sales
Merchandise Inventory, Beginning xxxxxx
Add: Net Purchases
Purchases xxxxxx
Less: Purchase Returns and Allowances (xxxxxx)
Purchase Discounts (xxxxxx) xxxxxx
Cost of Goods Available for Sale xxxxxx
Less: Merchandise Inventory, Ending (xxxxxx) XXXXXX
Gross Profit XXXXXX
Less: Operating Expenses
Selling and Distribution Expenses xxxxxx
General and Administrative xxxxxx XXXXXX
Net Profit XXXXXX
Less: Finance Cost (XXXXXX)
Total Net Profit XXXXXX

3
 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

4. REVERSING ENTRIES ARE JOURNALIZED AND POSTED

Reversing the entry from the adjustment is done by some of the companies but this process is
optional as the last step of accounting cycle is the preparation of post-closing trial balance. This
is an entry that is exactly opposite to what is the adjusting entry are made. This is a bookkeeping
technique that simplify the recording of regular transactions for the next accounting period.

The adjusting entry that are needed to be reversed are the entry that increased an asset or a
liability accounts means that all accruals are reverses and deferral that are initially recorded in
income statement method or the income method and the expense method of journalizing
transactions are reversed.

Self-Help: You can also refer to the sources below to help you
further understand the lesson.

You can also refer to the sources below to help you further understand the
lesson:
Ballada, W. and Ballada, S. (2018). Basic finacial accounting and repoting (21st
ed.). Manila: DomDane Publishers.
Ballada, W .and Ballada, S. (2015). Basic accounting: made easy (2015 ed.).
Manila: DomDane Publishers.
Lopez, R. M. (2016). Basic accounting for non-accountants: simplified
approach.(2016 ed., Vol. 1). Ma-a, Davao City: MS Lopez Printing & Pub.

Note:

The content of this manual is based on the textbook for ACC 111 titled “Basic Financial
Accounting and Reporting” by Ballada, Win, CPA, CBE, MBA and Ballada, Susan, CPA

Let’s Check!
I. Questions:

1. What is/are the difference/s in the adjusting entry of service concern and
merchandising concern business?
________________________________________________________
________________________________________________________
________________________________________________________

4
 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

II. True or False

1. The net sales is not an account name
2. Cost of goods sold is a major expense of a merchandising
3. The sales return and allowances account has a normal debit balance
4. The closing entry for transportation in debits purchases and credits income summary
5. Purchase discounts would be recorded as a credit.

III. Multiple choice

1. Which of the following accounts would appear on a worksheet for a merchandising
entity that uses the perpetual inventory system?
a. Cost of Goods Sold c. Income Summary
b. Purchases d. Purchase Returns and Allowances
2. The closing entries for a merchandising entity using the perpetual system.
a. Are fewer in number than if the periodic system were used.
b. Are the same regardless of inventory system used.
c. Calculate the gross profit in the Income Summary account.
d. Do not affect the Merchandise Inventory account.
3. Which of the following accounts would not appear on the worksheet for a
merchandising entity that uses the periodic inventory system?
a. Cost of Goods Sold c. Income Summary
b. Purchases d. Purchase Returns and Allowances
4. Which of the following accounts is closed by debiting the account?
a. Purchases c. Transportation In
b. Purchase returns and allowances. d. Sale Returns and Allowances
5. The merchandise inventory account balance in the trial balance columns of a
worksheet for a merchandising entity that uses periodic inventory system.
a. Appears in both debt and credit columns
b. Appears in the credit column only
c. Is correct as stated
d. Is the same as it was at the beginning of the period.

Let’s Analyze!
Problem 1
The Jose Delgado Enterprises trial balance on December 31, 2020 are presented below:
Sales P 9,630,000
Purchases 4,720,000
Merchandise Inventory 1/1/2020 2,170,000
Merchandise Inventory 12/31/2020 1,430,000
Salaries Expense-Selling 1,140,000

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

Salaries Expense- General 920,000

Office Supplies Expense 460,000
Depreciation Expense-Off. Equipment 320,000
Sales Returns and Allowances 280,000
Insurance Expense 55,000
Sales Discounts 210,000
Transportation Out 170,000
Depreciation Expense-Store Equipment 160,000
Purchase Returns and Allowances 110,000
Selling Supplies Expense 80,000
Purchase Discounts 70,000
Transportation In 50,000
Miscellaneous Expense 30,000
Required: Prepare Income Statement.

Problem 2
The beginning and ending inventories of JohnBrill Store for the year end Dec. 31, 2020 are as
follows:
Beginning P 300,000.00
Ending 230,000.00
Prepare adjusting entries to update the merchandise inventory account as of Dec. 31, 2020.

Problem 3
The unadjusted trial balance of Prince Brill Beauty Shop on Dec. 31, 2020 appears below:
Prince Brill Beauty Shop
Trial Balance
Dec. 31, 2020
Cash 100,000
Accounts Receivables 500,000
Merchandise Inventory 700,000
Prepaid Rent 300,000
Shop Equipment 1,600,000
Accumulated Depreciation – Shop Equipment 200,000
Accounts Payable 400,000
Torreon, Capital 1,300,000
Torreon, Withdrawals 100,000
Sales 2,900,000
Sales Discounts 100,000
Purchases 800,000
Purchase Returns and Allowances 200,000
Transportation In 100,000
Salaries Expense 400,000
Advertising Expense 150,000
Utilities Expense 100,000

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

Supplies Expense 50,000

TOTAL 5,000,000 5,000,000
Additional Information:
a. Accrued salaries at year-end amounted to P 30,000.00
b. Rent in the amount of P 100,000 has expired during the year
c. Depreciation on shop equipment is P 200,000
d. The merchandise inventory at the end of the year is P 500,000.
e. The salaries still unpaid is 56,000
f. Utilities unpaid is 24,500

Required:
a. Prepare Adjusting Entries
b. Prepare Closing Entries
c. Prepare 10 column worksheet
d. Prepare post-closing trial balance
e. Prepare reversing entries

In a Nutshell
Activity 1. Indeed, merchandising concerned business operation discussion help us to
understand the context of the business. Based on this discussion and the learning from the
exercises that you have done, please feel free to write your arguments or lessons learned below.
I have indicated my arguments or lessons learned.

1. ________________________________________________________________
________________________________________________________________
__________________________________________________________

2. ________________________________________________________________
________________________________________________________________
__________________________________________________________

3. ________________________________________________________________
________________________________________________________________
__________________________________________________________

4. _______________________________________________________________
________________________________________________________________
__________________________________________________________

7
 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

5. ________________________________________________________________
________________________________________________________________
__________________________________________________________

6. ________________________________________________________________
________________________________________________________________
__________________________________________________________

7. ________________________________________________________________
________________________________________________________________
__________________________________________________________

8. ________________________________________________________________
________________________________________________________________
__________________________________________________________

9. ________________________________________________________________
________________________________________________________________
__________________________________________________________

10. ________________________________________________________________
________________________________________________________________
__________________________________________________________

Q&A List
Do you have any question for clarification?
Questions/Issues Answers
1.
2.
3.
4.
5.

Keywords index
Adjusting Entries Closing Entries

8
 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

Big Picture in Focus: ULOb. Understand, describe, prepare and analyze general
journals, special journals, general ledger and subsidiary ledger.

Metalanguage

For you to demonstrate ULOb, you will need operational understanding of the terms
enumerated below.

Special Journal a journal that has specified purpose.

General Ledger is the control account for the preparation of financial statements

Subsidiary ledger is the account for the purpose of preparing statement of accounts for
individual customer.

Essential Knowledge
To perform the aforesaid big picture (unit learning outcomes), you need to fully understand the
following essential knowledge laid down in the succeeding pages. Please note that you are not
limited to exclusively refer to these resources. Thus, you are expected to utilize other books,
research articles and other resources that are available in the university’s library e.g. ebrary,
search.proquest.com etc., and even online tutorial websites.
1. CONTROL ACCOUNTS AND SUBSIDIARY LEDGERS

Generally, the company has control accounts for several customers and that is called the general
ledgers thus giving difficulty to the company to bill it customers. Creating individual customers
accounts will help the company to evaluate and monitor the balances of its customers this record
is called subsidiary ledgers. The amount presented in the balances of the individual accounts
will be added to get the total balance of the control accounts. The general ledger (control
account) will provide an aggregate amount for the preparation of financial statements.
The following ledgers are used for the following accounts: 1.) Accounts Payable, 2.) Inventory,
3.) Property, Plant and Equipment and 4.) Accounts Receivables.

2. SPECIAL JOURNALS

In the previous presentation, all the transactions are recorded to the general journal. The special
journals are used to specific type of transactions. The General Journal (GJ) and special journals
are the following: Sales Journal (S), Purchase Journal (P), Cash Receipts Journal (CR) and
Cash Disbursement Journal (CD).

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 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

The advantage of using special journals is that this permits division of labor. It also reduces time
of recording. It does not need routine explanation. It facilitates the efficiency by saving time in
posting the total amount of the account titles used and not by doing it an individual accounts. It
also lessen the repetitive writing of account titles like general journal.

Sales Journal
This records all the sales of merchandise on account. This journal considers the debit to
accounts receivable and credit to sales entries.

Sample format of Sales Journal:

Source: https://www.accountingformanagement.org/sales-journal/

Purchases Journal
This journal records all the purchases on account transactions. This records all the transactions
that includes a debit to purchases and credit to accounts payable.

Sample Format of Purchases Journal:

Source: https://www.accountingformanagement.org/purchases-journal/

10
 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

Cash Receipts Journal

This journal presents all the transactions that includes a receipts of cash or an entry that has a
debit to cash.

Sample Format of Cash Receipts Journal

Source: https://www.accountingformanagement.org/ cash-receipts-journal/

Cash Disbursements Journal

This journal presents all the transactions that includes a disbursements or payment of cash or
an entry that has a credit to cash.

Sample Format of Cash Disbursements Journal:

Source:
https://www.accountingformanagement.org/ cash-disbursements-journal/

General Journal
This journal presents all the transactions that do not fit to be presented in the special journals.
The transactions that are presented in this journal are those adjusting, closing and reversing
entries.

Sample Format of General Journal:

Date Particulars P.R. Debit Credit

11
 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

3. VOUCHER SYSTEM

This is to formalize the purchases and cash disbursements for verification purposes and
approval of payments. In this system the check may be drawn against the company only upon
written authorization in the form of voucher approved by responsible personnel. This consist of
vouchers, voucher register, unpaid voucher file, check register and paid voucher file.

The voucher is a serially numbered form that identifies the name and address of the payee, the
due date, terms description and invoice amount. This also includes a section for designated
officers to sign for approval of payment.

Self-Help: You can also refer to the sources below to help you
further understand the lesson.

You can also refer to the sources below to help you further understand the
lesson:
Ballada, W. and Ballada, S. (2018). Basic finacial accounting and repoting (21st
ed.). Manila: DomDane Publishers.
Ballada, W .and Ballada, S. (2015). Basic accounting: made easy (2015 ed.).
Manila: DomDane Publishers.
Lopez, R. M. (2016). Basic accounting for non-accountants: simplified
approach.(2016 ed., Vol. 1). Ma-a, Davao City: MS Lopez Printing & Pub.

Note:

The content of this manual is based on the textbook for ACC 111 titled “Basic Financial
Accounting and Reporting” by Ballada, Win, CPA, CBE, MBA and Ballada, Susan, CPA

Let’s Check!
I. Questions:
1. What is general journal?
________________________________________________________
________________________________________________________
________________________________________________________

2. What is sales journal?

________________________________________________________
________________________________________________________
________________________________________________________

12
 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

3. What is purchase journal?

________________________________________________________
________________________________________________________
________________________________________________________

4. What is cash receipts journal?

________________________________________________________
________________________________________________________
________________________________________________________

5. What is cash disbursements journal?

________________________________________________________
________________________________________________________
________________________________________________________

II. True or False

1. The voucher register is a substitute for a sales journal.
2. A check register is used to record all expenditures.
3. The sales of merchandise for cash is recorded in the sales journal
4. Sales on account of office equipment used in the business would be recorded in the
sales journal.
5. Special journals are modified in the practice to adapt to the specific needs of an entity.
6. The total of the other accounts column of the cash receipts journal is not posted to the
general ledger.
7. Transactions involving the payment of cash for any purpose are usually recorded in a
cash journal.
8. For each transaction recorded in the purchases journal, the credit is entered in the
accounts payable column.
9. Acquisition on account which are not provided for in the special debit columns are
recorded in the other accounts column in the purchases journal.
10. At the end of each month, the total of the amount column of the sales journal is posted
as a debit to accounts receivable and a credit to sales.

III. Multiple Choice Questions

1. When merchandise is returned or a price adjustment is granted , the entry is made in
the,
a. adjustment journal c. general journal
b. cash receipts journal d. purchases journal
2. A special journal contained columns for cash, purchases discount, and accounts
payable. The journal is,
a. cash receipts journal c. cash disbursement journal
b. general journal d. purchases journal

13
 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

3. Which of the following is true about a voucher system?

a. All major expenditures, including cash transactions for payment of rent and
utilities expense, would first be credited to vouchers payable before payment is
made.
b. The check register replaces the cash receipts journal
c. The voucher register contains a debit column for voucher payable
d. Transaction are first entered in the check register, and later, when payment is
made, in the voucher register.
4. Infrequent sales returns would be recorded in which of the journal?
a. cash payment c. general
b. cash receipts d. sales returns
5. The receipts of cash arising from a sales transaction would be recorded in the
a. cash receipts journal c. cash disbursement journal
b. general journal d. purchases journal

Let’s Analyze!
Indicate what types of journal thus the transaction provided:

1. Payments of salaries
2. Receipt of a note in settlement of a customer’s account
3. Cash refund to a customer.
4. Sales of merchandise for cash
5. Purchase of merchandise on account
6. Payment of interest on a mortgage
7. Purchase of merchandise for cash
8. Sales of merchandise on account
9. Receipts of cash from customer in settlement of an account
10. Promissory note was sent to a creditor in settlement of an account.

In a Nutshell
Activity 1. Indeed, special journals and voucher system really give a good effect to the
accounting information system of the company. Based on the discussion and the learning from
the exercises that you have done, please feel free to write your arguments or lessons learned
below. I have indicated my arguments or lessons learned.

1. ________________________________________________________________
________________________________________________________________
__________________________________________________________

14
 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

2. ________________________________________________________________
________________________________________________________________
__________________________________________________________

3. ________________________________________________________________
________________________________________________________________
__________________________________________________________

4. _______________________________________________________________
________________________________________________________________
__________________________________________________________

5. ________________________________________________________________
________________________________________________________________
__________________________________________________________

Q&A List
Do you have any question for clarification?
Questions/Issues Answers
1.
2.
3.
4.
5.

Keywords index
Payroll Special Journal
Sales Journal Purchase Journal
Cash Receipts Journal Cash Disbursements Journal

15
 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

Big Picture in Focus: ULOc. Analyze and prepare necessary documents and
reports for payroll accounting.

Metalanguage

For you to demonstrate ULOc, you will need operational understanding of the terms
enumerated below.

Labor is the physical or mental effort provided by employee to the company.

Essential Knowledge

To perform the aforesaid big picture (unit learning outcomes), you need to fully understand the
following essential knowledge laid down in the succeeding pages. Please note that you are not
limited to exclusively refer to these resources. Thus, you are expected to utilize other books,
research articles and other resources that are available in the university’s library e.g. ebrary,
search.proquest.com etc., and even online tutorial websites.

1. LABOR

Employee is the recipients of salaries and wages while employer is the person whom received
the performance of an employee.
Payroll is the amount paid to employees for rendering service o the employer and payroll period
is the period of paying the salaries and wages.

Labor are any physical or mental effort provided by employee. These are works or human
resources in producing the product. They are paid with employee benefit such as compensation,
salaries and wages and this payment may be hourly, daily, weekly, biweekly, monthly, yearly or
piece work basis. Wages are paid to production workers and salaries are paid to managerial and
clerical services.

Employee Payroll Taxes

SSS Contribution is a statutory deduction for an employee that is contributed to the Social
Security system for monthly pension at the time of retirement and death benefits and loans
(housing, calamity, educational, maternity, fraternity and other loans).

16
 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

Source: https://www.sss.gov.ph/sss/DownloadContent?fileName=2019_Contribution_Schedule.pdf

Pag-Ibig Contribution is also a statutory deduction that should be according to the table of
payment. Upon retirement the amount returned to the employee will be the contribution of the
employee and employer plus accumulated dividends

Regular Local Employee an OFW with employers subject to Pag-IBIG coverage

Compensation Employee share Employer share
1,500 and below 1% 2%
Above 1,500 2% 2%

17
 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

Self-Employed and OFW with employer exempted from Pag-IBIG coverage

Compensation Share
1,500 and below 1%
Above 1,500 2%

PhilHealth Contribution is for the benefit of the employee for hospitalization and medical
assistance.

Source: https://www.philhealth.gov.ph/news/2019/new_contri.php#gsc.tab=0

Withholding Taxes

Income tax for the compensation of employee and as per TRAIN Law the income tax is based
on below table.

18
 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

Sources: https://www.bir.gov.ph/index.php/tax-information/withholding-tax.html

Payroll Summary
For the period June 1-15, 2020

Jose Joanna Total

Gross Earnings 10,000.00 25,000.00 35,000.00
Less: Withholding and Deduction:
Income Taxes 0.00 3,333.25 3,333.25
SSS Premiums 800.00 800.00 1,600.00
Phil Health Contributions 600.00 750.00 1,350.00
Pag-Ibig Contributions 400.00 500.00 900.00
Total Deductions 1,800.00 5,383.25 7,183.25
Net Earnings 8,200.00 19,616.75 27,816.75

Self-Help: You can also refer to the sources below to help you
further understand the lesson.

You can also refer to the sources below to help you further understand the
lesson:
Ballada, W. and Ballada, S. (2018). Basic finacial accounting and repoting (21st
ed.). Manila: DomDane Publishers.
Ballada, W .and Ballada, S. (2015). Basic accounting: made easy (2015 ed.).

19
 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

Manila: DomDane Publishers.

Lopez, R. M. (2016). Basic accounting for non-accountants: simplified
approach.(2016 ed., Vol. 1). Ma-a, Davao City: MS Lopez Printing & Pub.

Note:
The content of this manual is based on the textbook for ACC 111 titled “Basic Financial
Accounting and Reporting” by Ballada, Win, CPA, CBE, MBA and Ballada, Susan, CPA

Let’s Check!
I. Questions:

1. What is employee?
________________________________________________________
________________________________________________________
________________________________________________________

2. What is employer?
________________________________________________________
________________________________________________________
________________________________________________________

3. What is labor?
________________________________________________________
________________________________________________________
________________________________________________________

4. What is/are the difference/s between salaries and wages?

________________________________________________________
________________________________________________________
________________________________________________________

II. True or False

1. Payroll deductions are based on the gross earnings of the employee (regular earnings
plus overtime)
2. The amount of income taxes withheld from employee gross pay is an expense to the
employer.
3. In ideal circumstances, each payroll check is delivered personally to the employee
who signs a receipt for it.
4. Share of contribution by employer is deducted from the gross pay of the employee.
5. Employee-employer relationship is a relationship that exist only if you are regular
employee.

20
 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

III. Multiple choice

1. The following were the different wage plans commonly used by some companies,
except
a. Hourly-Rate Plan c. Work-Rate Plan
b. Piece-Rate Plan d. Modified Wage Plan
2. “Take home pay” or net pay means
a. gross pay plus the amount paid for you by your employer.
b. gross pay less all deductions
c. the amount earned per hour times number of hours worked.
d. gross pay less only income tax withheld.
3. To check the accuracy of hours worked, one would ordinarily compare clock cards
with:
a. employee earnings records c. job tickets
b. personnel records d. labor variance reports
4. An example of a fringe benefit is:
a. the employer portion of Payroll taxes
b. the straight rate for overtime hours
b. the direct labor wage rate
d. withheld taxes

Let’s Analyze!
Ana is an employee that earn a gross pay of 18,000 per qeuncena.
1. How much is the net take home pay or net earnings of Ana every month?
2. Journalize the transaction.
In a Nutshell
Activity 1. Indeed, labor accounting is helpful in computing our own net earnings. Based on the
discussion and the learning from the exercises that you have done, please feel free to write your
arguments or lessons learned below. I have indicated my arguments or lessons learned.

1. ________________________________________________________________
________________________________________________________________
__________________________________________________________

2. ________________________________________________________________
________________________________________________________________
__________________________________________________________

21
 Department of Accounting Education
Mabini Street, Tagum City
Davao del Norte
Telefax: (084) 655-9591, Local 116

3. ________________________________________________________________
________________________________________________________________
__________________________________________________________

4. _______________________________________________________________
________________________________________________________________
__________________________________________________________

5. ________________________________________________________________
________________________________________________________________
__________________________________________________________

Q&A List
Do you have any question for clarification?
Questions/Issues Answers
1.
2.
3.
4.
5.

Keywords index
Employer’s Payroll taxes Statutory Deductions

22