Semester 2 Week 3 PP (CSR and employee benefits)

Question 1

What is CSR?

Answer 1

CSR – Corporate Social Responsibility – is a form of corporate citizenship.

In other words companies take responsibility for their actions and the environment they operate in.

This essentially means that the company goes above and beyond the minimum standards required by law.

Question 2

What type of activities is there in CSR?

Answer 2

Charitable donations
Giving staff time off to volunteer
Supply chain verification – for example making sure there is not exploited labour
Attempting to minimise pollution
Employment opportunities for those from deprived backgrounds

Question 3

Why do companies undertake CSR?

Answer 3

Genuine social concern
Good publicity
“Free marketing” – good to get name out
Disguises bad behaviour
Can be good for employee morale

Question 4

What are the two types of National Insurance (NI)?

Answer 4

EE’s NI – Employee’s NI, the National Insurance deducted from an employees wages.

ER’s NI – Employer’s NI, the National Insurance paid by the employer over and above wages.

Question 5

What is the journals to record payment of wages?

Answer 5

To record a payment:

Dr wages and salaries (P/L)
Cr HMRC payable (SFP)
Cr Bank
Being monthly wages

The following month the payment will be made to HMRC

Dr HMRC payable (SFP)
Cr Bank
Being payment of HMRC payable

Question 6

What steps do we follow to account for wages?

Answer 6

1. Calculate the total cost to the employer by adding gross wages to employer’s NI
2. Calculate the net wages by gross wages – PAYE – employee’s NI = net wages
3. Calculate the HMRC payable by adding PAYE to both types of NI.
4. The journal can then be prepared – it is the net wages that go through the bank.

Question 7

Curran Plc.’s total gross wages for the month of August were £3,800,000. The Employer’s NI for the month were £570,000. PAYE for August was £830,000 and employee’s NI was £483,000.
Prepare the journal for the wages in August and the payment to HMRC in September

Answer 7

1. Total cost to employer = £3,800,000 + £570,000 = £4,370,000
2. Net wages = £3,800,000 - £830,000 - £483,000 = £2,487,000
3. Total HMRC amount due = £830,000 + £570,000 + £483,000 = £1,883,000

Step 4: Prepare journal

Dr wages and salaries (P/L) 4,370,000
Cr HMRC payable 1,883,000
Cr Bank 2,487,000
Being wages for August

The following month the payment will be made to HMRC by the following journal.

Dr HMRC payable 1,883,000
Cr bank 1,883,000
Being payment of HMRC