Question

Prepare journal entries,On 25 September, you pay payroll for all employees, out of the company's bank account. Total gross salary was 5,750,000 and PAYE was 2,000,000. The salary is paid to the employees out of your company's bank account but PAYE payments will be made to the authorities in October.

Answer 1

On 25 September, we have:

Debit Salary expenses for $5,750,000; Credit Bank for $3,750,000; and Credit PAYE payable for $2,000,000.

Step-by-step explanation:

On 25 September, the journal entries will look as follows:

Date Account Title Dr ($) Cr ($)

Sep. 25 Salary expenses 5,750,000

Bank (w.1) 3,750,000

PAYE payable 2,000,000

(To record total gross salary.)

Note that when the PAYE is eventually paid to the authorities in October, let say on October 5, the journal entries will look as follows:

Date Account Title Dr ($) Cr ($)

Oct. 05 PAYE payable 2,000,000

Bank 2,000,000

(To record PAYE paid to the authorities.)

Workings:

w.1: Bank = Total gross salary - PAYE = $5,750,000 - $2,000,000 = $3,750,000