ACCA F6 Chapter 3

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ACCA F6 Chapter 3 - Quiz


From BPP study text, this is the quiz for ACCA Chapter 3 "Employment Income".


Questions and Answers
  • 1. 

    Contract for services is _______________.

    • A.

      Employment

    • B.

      Self-employment

    Correct Answer
    B. Self-employment
    Explanation
    Explanation: Contract of services in employment and contract for services is self-employment.

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  • 2. 

    A provides his services to B. B must offer work to A and A must perform the work. The arrangement is: 

    • A.

      Employment

    • B.

      Self-employment

    Correct Answer
    A. Employment
    Explanation
    Explanation: A must accept further work and B must provide further work hence it is contract for services that is employment.

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  • 3. 

    A works for B and brings his own equipment and hires his own personnel when additional work is required, although B pays him extra charges for the additional workforce. This is an arrangement of:

    • A.

      Employment

    • B.

      Self-employment

    Correct Answer
    B. Self-employment
    Explanation
    Explanation: Self employment has the indication that worker uses his own equipment and hire his own personnel.

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  • 4. 

    A works with B. He opened a new branch of B’s restaurant and invested 50% of the cost. He will share the profit and loss 50:50. This is:

    • A.

      Employment

    • B.

      Self-employment

    Correct Answer
    B. Self-employment
    Explanation
    Explanation: The risk in this engagement for A is high (Financial Risk) and hence it is self-employment.

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  • 5. 

    For the month of March, B pays £1,234 to A. The amount was for the wages of A between 1-31 March but was calculated on 5 April and paid on 7 April. The wages are deemed to have been earned by A on:

    • A.

      31 March

    • B.

      5 April

    • C.

      7 April

    Correct Answer
    A. 31 March
    Explanation
    Explanation: Earnings are deemed to be received on the earlier of “The time when payment is received” and “The time when a person becomes entitled to receive the payment”. In this case, it is 31 March.

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  • 6. 

    A is a director in B Plc. B Ltd. Prepare its annual accounts to every 31 December. For the year ending 31 December 2011, A became entitled to £50,000 bonus when he met his pre-agreed targets on 30 November 2011. The company accounted for this bonus in the financial statements prepared for the year ended 31 December 2011 when they compiled their accounts on 31 January 2011. The amount was then paid on 15 April 2012. The date when it is deemed that A received the bonus is:

    • A.

      30 November 2011

    • B.

      31 December 2011

    • C.

      31 January 2012

    • D.

      15 April 2012

    Correct Answer
    A. 30 November 2011
    Explanation
    Explanation: A became entitled to the dividend on 30 November 2011 and hence this is considered to be the time when his earnings are considered to be received.

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  • 7. 

    A is a director in B Plc. B Ltd. Prepare its annual accounts to every 31 December. For the year ending 31 December 2011, A became entitled to £50,000 bonus when the accounts were finalized on 31 January 2012 and the performance was considered deserving the bonus on 31/1/12. The company accounted for this bonus in the financial statements prepared for the year ended 31 December 2011 when they compiled their accounts on 31 January 2011. The amount was then paid on 15 April 2012. The date when it is deemed that A received the bonus is:

    • A.

      � 30 November 2011

    • B.

      � 31 December 2011

    • C.

      � 31 January 2012

    • D.

      � 15 April 2012

    Correct Answer
    C. � 31 January 2012
    Explanation
    Explanation: A became entitled to the dividend on 30 November 2011 and hence this is considered to be the time when his earnings are considered to be received. The rule for the directors is that they are deemed to have received the payment at the earliest of “When payment is made”, “when the person becomes entitled to the payment”, “When the amount is credited in the company’s accounts”, The end of company’s period of accounts (if amount is determined by then)”, or “The time the amount is determined”.

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  • 8. 

    If A earns £10,000 from B during the year and his allowable deductions are £12,000, his net earnings would be:

    • A.

      £22,000

    • B.

      £10,000

    • C.

      £Nil

    • D.

      £(2,000)

    Correct Answer
    C. £Nil
    Explanation
    Explanation: Net earnings are earnings less allowable deductions which is 10,000 – 12,000 = (2,000) however the same cannot be a negative amount hence the net earnings are Nil.

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  • 9. 

    Jay is employed by Kay and his duty is to work at his clients. Kay tells Jay everyday where Jay must go for work. The actual travelling expenses of Jay during the tax year were £3,210. How much of the travelling expenses are deductible by Jay if his annual salary is £2,109.

    • A.

      Nil

    • B.

      £2,109

    • C.

      £3,210

    • D.

      £4,000

    Correct Answer
    B. £2,109
    Explanation
    Explanation: £2,109 is deductible as net earnings cannot be in negative.

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  • 10. 

    1.       On 1 June 2007, Ell was told by his company to work in a town 60 miles of the city. He was told to work for 23 months. At the end of 22nd month, he was asked to work for 3 further months (26 months).

    • A.

      He can claim the travelling expenditure for entire 26 months

    • B.

      He can claim the travelling expenditure for the 24 months

    • C.

      He can claim the travelling expenditure for initial 23 months

    • D.

      He can claim the travelling expenditure for 22 months

    Correct Answer
    D. He can claim the travelling expenditure for 22 months
    Explanation
    Explanation: If a person is obliged to incur and pay the travelling expenses to travel to a place other than permanent workplace where the appointment is not more than 24 months, all such expenses can be claimed as deduction. If at any time during this period, the appointment is extended beyond 24 months; all travelling expenses will not be deductible as soon as the employee knows of such decision. Jay became aware of the decision at the end of 22nd month so the prior deductions are valid but he will no longer be able to deduct the future travelling cost.

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  • 11. 

    1.       Which is the following is not deductible:

    • A.

      Contributions to registered occupational pension schemes

    • B.

      Subscription to professional bodies, if relevant to the duties of the employment

    • C.

      Cost of improvement for home when the employee works from home

    • D.

      Payment of certain liabilities relating to the employment

    Correct Answer
    C. Cost of improvement for home when the employee works from home
    Explanation
    Explanation: Home improvement is not wholly, exclusively and necessarily for the performance of duties. Other three are specifically mentioned as exempt in the rules.

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  • 12. 

    Emme travels 3,000 business miles in his private car using his own fuel during the tax years 2011/12 and is paid 35 pence per mile as travelling allowance. The affect on his employment income is that:

    • A.

      £1,050 will be added in his salary

    • B.

      £1,200 will be deducted from his salary

    • C.

      £300 will be added in his salary

    • D.

      £300 will be deducted from his salary

    Correct Answer
    D. £300 will be deducted from his salary
    Explanation
    Explanation: Employee using his own car is entitled to 40 pence per mile for the first 10,000 miles and 25 pence for any further mileage. Emme is entitled to .45 X 3,000 = £1,350 travelling allowance but is paid 3,000 X .35 = £1,050. The shortage of £300 is then deducted from his Employment Income.

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  • 13. 

    Auo travels 13,000 business miles using his private car and fuel. His company pays him 35 pence per mile. The affect on his employment income is that:

    • A.

      £700 will be added in the employment income

    • B.

      £700 will be deducted from his employment income

    • C.

      £150 will be added in the employment income

    • D.

      £150 will be deducted from his employment income

    Correct Answer
    B. £700 will be deducted from his employment income
    Explanation
    Explanation: He is eligible for (10,000 X 0.45) £4,500 for first 10,000 miles and (3,000 X .25) £750 for the remaining 3,000 miles. He is paid £4,550 (13,000 X .35) and hence is under-paid £200. This can be deducted from his salary.

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  • 14. 

     Zed earns Total Income (NSI) of £40,000. He is considering paying £1,000 through payroll deduction scheme or making a net gift aid donation of £900. The impact on his tax liability will be:

    • A.

      He will end up with the same tax payments

    • B.

      He will pay more tax if he opts for Gift Aid Donation

    • C.

      He will pay less tax if he opts for Payroll Deduction Scheme

    • D.

      There is not enough information for determining the impact on his tax liability

    Correct Answer
    B. He will pay more tax if he opts for Gift Aid Donation
    Explanation
    Explanation: The tax liability will be higher in case if he opts for Gift Aid Donation as total income will be reduced in case of payroll deduction scheme as compared to Gift Aid Donation where there is no impact on total income.

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  • 15. 

    Zed earns Total Income (NSI) of £40,000. He is considering paying £1,000 through payroll deduction scheme or making a net gift aid donation of £900. The impact on net disposable income will be:

    • A.

      He will end up with the same net disposable income

    • B.

      He will have more disposable income if he opts for Gift Aid Donation

    • C.

      He will have more disposable income if he opts for Payroll Deduction Scheme

    • D.

      There is not enough information for determining the impact on his disposable income

    Correct Answer
    C. He will have more disposable income if he opts for Payroll Deduction Scheme
    Explanation
    Explanation: If the Gross Gift Aid Donation (900 X 100/80) is equal to the amount deducted under the payroll deduction scheme, he will end up with the same net disposable income. If the Gross Gift Aid Donation is greater than the amount under the payroll deduction, the net disposable income will be less than that under the payroll deduction scheme.

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  • Current Version
  • Jan 30, 2024
    Quiz Edited by
    ProProfs Editorial Team
  • Feb 22, 2012
    Quiz Created by
    LFTC2011

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