Question

Albury Ltd pays management on a monthly basis and staff on a fortnightly basis. Payroll is processed and paid on the 1st of each month for management, and the 1st and 15th of each month for staff. Gross management salaries per month are $400 000 (less $190 000 tax). Gross staff wages per month are $600 000 (less $300 000 tax), and paid in equal instalments on the 1st and 15th of each month. Tax is remitted on the 15th of the following month.

Required

Prepare journal entries for January payroll.  

Answer 1

	Account	Debit	Credit
Jan. 15	Salaries expense	300,000
	FIT payable		150,000
	Cash		150,000
	(payment for staff salaries)
Feb. 1	Salaries expense	700,000
	FIT payable		340,000
	Cash		360,000
	(payment for salaries)
Feb. 15	FIT payable	490,000
	Cash		490,000
	(payment of income tax)