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Salesman’s bonus for the y/e 2019/20 is to be determined from the following data:
bonus for the year to: Paid during Pounds
31/10/17 may 2018 1920
31/10/18 may 2019 1260
31/10/19 may 2020 2700sir as per the rules the bonus is accounted for on the basis of earlier of- due or receipt basis.
so the answer to the above question should be 2700 pounds. the rationale being that the bonus gets due on 31/10/19(between 2019/20), so it should not matter when its paid afterwards. the date 31/10/19lies between 2019/20 and so the amount should be assumed to have been given 31/10/19, regardless of actual date of payment.
however the correct answer is 1260pounds. Which is baffling to me(to say the least)!
So can you clear my doubt sir?
bonus accrued on 31/10/19 but was paid in may 2020, and the earlier of the two, which is relevant for the y/e 2019/20 is 31/10/19. so that means it should be 2700pounds.
A received basis is used to assess employment income and the study notes state that:
“The date received is taken as the earlier of the date when the employee became entitled to the payment or the date when it was actually received by the employee.”
In the lectures we state that a question testing this rule will clearly use the wording “became entitled to the payment on ….”
It is NOT an accruals basis based on the accounting period of the employer in which the bonus was earned.
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