ASSIGNMENT NO.

2 ON COMPREHENSIVE DEGREE EXIT TUTORIAL

PREPARED BY ID.NO

Esubalew Kefale EAD/1536/2009

Sec. D

SUB TO INS. Mr. GIRMA LETA

1|Page SMU/FACULTY OF ACCOUNTING AND FINANCE

 1) I. Compute the income tax of each employee.
First compute the taxable income
The Gross Earning is taxable income except allowances. however, some allowances are partially
taxable according to the directives issued by the ministry of councils.
so, the Gross earning = Basic salary + overtime earning + Allowances + Bounces
1) JB / S503/
B.S = 3710 Br
Overtime earning = (basic salary) X (Overtime hours working) X (Overtime rating)
Normal working hours
Normal working hours = 48x4=192 hrs
But JB doesn't work overtime.
Allowance = 500 Br
Gross earning = 3710 + 500 Br
= 4210Br
Taxable income = 3710 Br, because 500Br is not taxable
Income tax = Taxable Income X Taxable rate - Tax adjustment
= 3710 X 20% - 302.50 Br
= 439.5Br
2) ZA /E502/
B.S = 8500 Br
Overtime earning = 8500 X 10 X 2.5
192
= 1106.77Br
Note: a worker shall be paid at a rate of 2.5 for overtime work on a public holiday.
Allowance = 400 Br
Gross earning = 8500 + 400 Br + 1106.77Br
= 10,006.77Br
But taxable Income = 9606.77 Br because 400Br is not taxable
Income tax = 9606.77 X 30% - 955 Br
= 1927.03Br
3) TM /K502/

2|Page SMU/FACULTY OF ACCOUNTING AND FINANCE

B.S = 800 Br
Overtime earning = 800 X 10 X 2.5
192
= 104.17Br
Gross earning = 800 + 104.17Br
= 904.17Br
taxable Income = 904.17 Br
Income tax = 904.17 X 10% - 60 Br
= 30.42Br
4) BC/A500/
B.S = 14,200 Br
No overtime and allowance
so Gross earning = taxable Income = 14,200 Br
Income tax = 14,200 Br X 35% - 1500 Br
= 3,470Br
II. Compute the total deductions of each employee.
ü Deductions are Income tax, Pension contribution and other voluntary deductions.
ü All privet and government Employees pay 7% of their basic salary pension contribution
in accordance with proclamation No. 715/2011 E.C ( including permanent and contract
employees)
Pension Contribution = Basic salary X 7%
1) JB / S503/
Pension Contribution = 3710 X 7%
= 259.7Br
Total deduction = Income tax + Pension Contribution
= 439.5Br + 259.7Br
= 699.2 Br
2) ZA /E502/
Pension Contribution = 8500X 7%
= 595 Br
Total deduction = 1927.03Br + 595 Br

3|Page SMU/FACULTY OF ACCOUNTING AND FINANCE

 = 2522.03 Br

3) TM /K502/
Pension Contribution = 800X 7%
= 56 Br
Total deduction = 30.42Br + 56 Br
= 86.42 Br
4) BC/A500/
Pension Contribution = 14,200X 7%
= 994Br
Total deduction = 3,470Br + 994Br
= 4,464 Br
III. Determine the net-pay (take- home-pay) of each employee.
Net Pay = Gross Earning - Total Deduction
1) JB / S503/
Gross Earning = 4210 Br , Total Deduction = 699.2 Br
Net Pay = 4210 Br - 699.2 Br
= 3510.8 Br
2) ZA /E502/
Gross Earning = 10,006.77Br, Total Deduction = 2522.03 Br
Net Pay = 10,006.77Br - 2522.03 Br
= 7484.74 Br
3) TM /K502/
Gross Earning = 904.17Br, Total Deduction = 86.47 Br
Net Pay = 904.17Br - 86.42 Br
= 817.75 Br
4) BC/A500/
Gross Earning = 14,200 Br, Total Deduction = 4,464 Br
Net Pay = 14,200 Br - 4,464 Br
= 9,736 Br
IV. Compute the total tax payable for the month to federal government.

4|Page SMU/FACULTY OF ACCOUNTING AND FINANCE

 Total tax Payable = 439.5Br + 1927.03Br + 30.42Br + 3,470.00 Br
= 5,866.95 Br
V. Compute and recognize the total payroll tax expense for the month of Sep, 20xx
Since the employer contribute towards the same fund 11% of the basic salary of every employee,
the total payroll tax expenses is as follows.
Payroll expense = Total basic salary X 11%
= 27,210 Br X 11%
= 2993.1 Br

Payroll expense ------------------- 2993.1

Pension contribution Payable ------------ 2993.1
VI. Prepare a payroll register (sheet) for the month of Sep.20xx.

Lucy Trading Co.

Payroll Register (Sheet)
For Month of September,20xx
Pay day: September 30,20xx
Earnings (Birr) Deductions (Birr)  
ID Name of Pension Total
No. Employee Basic Position Gross Income Net Pay
Over Time Contribut Deductio
Salary Allowance Earning Tax (Birr)
ion n
S50
JB
3 3,710.00 500.00 - 4,210.00 439.50 259.70 699.20 3,510.80
E50
ZA
2 8,500.00 400.00 1,106.77 10,006.77 1,927.03 595.00 2,522.03 7,484.74
K50
TM
2 800.00   104.17 904.17 30.42 56.00 86.42 817.75
A50
BC
0 14,200.00   - 14,200.00 3,470.00 994.00 4,464.00 9,736.00
 
Total 27,210.00 900.00 1,210.94 29,320.94 5,866.95 1,904.70 7,771.65 21,549.29

VII. Record the payment of salary as of Sep, 30, 20xx using Check Stub No. 5432.

Salary Expense --------------------- 29,320.94

Employee income tax payable ------------------- 5,866.95
Pension contribution payable --------------------- 1,904.70
cash---------------------------------------------------- 21,549.29
5|Page SMU/FACULTY OF ACCOUNTING AND FINANCE
VIII. Record the payment of the income taxes and provident found to the concerned
governmental body on Sep 30, 20xx.

Employee income tax payable ------------------- 5,866.95

Pension contribution payable --------------------- 1,904.70
cash----------------------------------------------------- 7,771.65

2) a) Compute the income tax of each employee.

First compute the taxable income and Gross earning

Gross earning = Basic salary + overtime earning + Allowances + Bounces
1) SC / 101/
B.S = 7400 Br
Overtime earning = (basic salary) X (Overtime hours working) X (Overtime rating)
Normal working hours
Normal working hours = 40x4=160 hrs
Here I take the Overtime working hours Between 5:00pm-10:00pm, because the given overtime
worked hr is 4. In addition to this I don't understand the duration of overtime 4:00pm-7:00am.
after 5:00pm- before 10:00pm and 6:00am-8:00am, the overtime rating is 1.25 and after 10:00pm
- before 6:00am, the overtime rating is 1.5.
Overtime earning = 7400 X 4 X 1.25
160
=231.25 Br
transportation Allowance = 1,500 Br,
As per the proclamation, transportation allowance is 1/4 of her/ his basic salary but not exceed
2,200 Br.
The allowed transportation allowance = 1/4 X 7400 Br
=1850 Br
Actual paid = 1500 Br
So, the actual paid is less than 1850 Br and 2,200 Br, transportation allowance doesn't taxable.

6|Page SMU/FACULTY OF ACCOUNTING AND FINANCE

Gross earning = 3710 + 1500 Br + 231.25 Br
= 9,131.25 Br
Taxable income = 7631.25 Br, because 1500Br is not taxable

Income tax = Taxable Income X Taxable rate - Tax adjustment

= 7631.25 X 20% - 302.50 Br
= 1334.38Br

2) YW/102/
B.S = 14,320Br
No overtime and allowance
so Gross earning = taxable Income = 14,320Br
Income tax = 14,200 Br X 35% - 1500 Br
= 3,512 Br
3) TG/103/
B.S = 650 Br
No overtime and allowance
so Gross earning = taxable Income = 650 Br
Income tax = 650 Br X 10% - 60 Br
= 5 Br
4) BB / 104/
B.S = 9,205 Br

Overtime earning = 9205 X 3 X 2

160
= 345.19 Br

Gross earning = 9,205 Br + 345.19 Br

= 9550.19 Br

Taxable income = 9550.19 Br

Income tax = Taxable Income X Taxable rate - Tax adjustment

= 9550.19 Br X 30% - 955 Br
= 1910.06 Br

7|Page SMU/FACULTY OF ACCOUNTING AND FINANCE

5) HK/ 105/
B.S = 5700 Br

Overtime earning = 5700 X 6 X 2.5

160
= 534.38 Br

Gross earning = 5700Br + 534.38 Br

= 6234.38 Br

Taxable income = 6234.38 Br

Income tax = Taxable Income X Taxable rate - Tax adjustment

= 6234.38 Br X 25% - 565 Br
= 993.59 Br

b) Compute the total deductions of each employee.

ü Deductions are Income tax, Pension contribution and other voluntary deductions.
ü All privet and government Employees pay 7% of their basic salary pension contribution
in accordance with proclamation No. 715/2011 E.C ( including permanent and contract
employees)
Pension Contribution = Basic salary X 7%
1) SC / 101/
Pension Contribution = 7400 X 7%
= 518 Br
Total deduction = Income tax + Pension Contribution
= 1334.38Br + 518 Br
= 1852.38 Br
2) YW/102/
B.S = 14,320Br
Pension Contribution = 14,320Br X 7%
=1002.4 Br
Total deduction = 3,512 Br + 1002.4 Br
= 4514.4 Br

8|Page SMU/FACULTY OF ACCOUNTING AND FINANCE

3) TG/103/
B.S = 650 Br
Pension Contribution = 650X 7%
= 45.5 Br
Other deduction = 300Br
Total deduction = 5 Br + 45.5 Br + 300 Br
= 350.5 Br
4) BB / 104/
B.S = 9,205 Br

Pension Contribution = 9,205 X 7%

= 644.35 Br
Total deduction = 1910.06 Br + 644.35 Br
= 2554.41 Br

5) HK/ 105/
B.S = 5700 Br

Pension Contribution = 5700 X 7%

= 399 Br
Total deduction = 993.59 Br + 994Br
= 1392.59 Br

C) Determine the net-pay (take-home-pay) of each employee.

Net Pay = Gross Earning - Total Deduction

1) SC / 101/
Gross Earning =9131.25 Br , Total Deduction = 1852.38 Br
Net Pay = 9131.25 Br - 1852.38 Br
= 7278.88 Br

2) YW/102/
Gross Earning = 14,320Br , Total Deduction = 4514.4 Br

9|Page SMU/FACULTY OF ACCOUNTING AND FINANCE

 Net Pay = 14,320Br - 4514.4 Br
= 9805.6 Br

3) TG/103/
Gross Earning = 650 Br, Total Deduction = 350.5 Br
Net Pay = 650Br - 350.5 Br
= 299.5 Br

4) BB / 104/
Gross Earning = 9,205 Br , Total Deduction = 2554.41 Br
Net Pay = 9,205 Br - 2554.41 Br = 6995.78 Br
5) HK/ 105/
Gross Earning = 5700 Br, Total Deduction = 1392.59 Br
Net Pay = 5700Br - 1392.59 Br = 4841.78 Br

d) Compute and the total tax payable of the month to federal government.

Total tax Payable = 1334.38Br + 3,512 Br + 5 Br + 1910.06 Br + 993.59 Br

= 7755.03 Br
e) Compute and recognize the total payroll tax expense for the month of June 20xx.

Since the employer contribute towards the same fund 11% of the basic salary of every employee,
the total payroll tax expenses is as follows.
Payroll expense = Total basic salary X 11%
= 37,275Br X 11%
= 4100.25 Br
Payroll expense ------------------- 4100.25
Pension contribution Payable ------------ 4100.25
f) Prepare a payroll register (sheet) for the month of June 20xx.

Generous Charity Organization

Payroll Register (Sheet)
For Month of Jun,20xx
Pay day: Jun 30,20xx
ID Name Earnings (Birr) Deductions (Birr)  

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FINANCE
 of Transport Pension Other Total
No Basic Over Gross Incom Net Pay
Employ ation Contribu Deduc Deducti
. Salary Time Earning e Tax (Birr)
ee Allowance tion tions on
101 SC
7,400.00 1,500.00 231.25 9,131.25 1334.38 518.00   1,852.38 7,278.88
102 YW
14,320.00     14,320.00 3512.00 1,002.40   4,514.40 9,805.60
103 TG
650.00     650.00 5.00 45.50 300 350.50 299.50
104 BB
9,205.00   345.19 9,550.19 1910.06 644.35   2,554.41 6,995.78
105 HK
5,700.00   534.38 6,234.38 993.59 399.00   1,392.59 4,841.78

Total Amount 37,275.00 1,500.00 1,110.81 39,885.81 7,755.03 2,609.25 300.00 10,664.28 29,221.54

g) Record the payment of salary as of June 30, 20xx Using Check stub No. 1234

Salary Expense --------------------- 39,885.81

Employee income tax payable ------------------- 7,755.03
Pension contribution payable --------------------- 2,609.25
credit association payable --------------------------- 300
cash----------------------------------------------------- 29,221.54

h) Record the payment of the claim of the credit association of their enterprise on
July 20xx. Use check stubs No.1674.

credit association payable ------------------------- 300

cash--------------------------------------------------- 300

i) Record the payment of the withhold payments and pension contribution to

the concerned government body on July 31, 20xx.

Employee income tax payable ------------------- 7,755.03

Pension contribution payable --------------------- 2,609.25
cash---------------------------------------------------10,364.28

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FINANCE