The company paid employee salaries totaling 300,000 yen. It withheld income tax of 20,000 yen and the employees' share of social insurance premiums of 30,000 yen, and transferred the remainder from its ordinary deposit account. Which journal entry is correct?
AnswerB. Dr Salaries (給料) 300,000 / Cr Income tax withheld (所得税預り金) 20,000, Cr Social insurance premiums withheld (社会保険料預り金) 30,000, Cr Ordinary deposit (普通預金) 250,000
The correct entry debits Salaries for the full 300,000 yen and credits the withheld income tax and social insurance premiums to Income tax withheld and Social insurance premiums withheld (liabilities). These are liabilities because the company holds the money to pay it later on behalf of employees. Crediting Statutory welfare expenses is wrong: that account is the expense for the company's own share of premiums, not the amount withheld from employees. Recording only the take-home 250,000 yen understates the salary expense and leaves no record of the amounts withheld. Suspense receipts is for cash received whose nature is unknown, so it is not used for withholdings whose nature is clear.
Q2 | Paying social insurance premiums
The company paid 60,000 yen from its ordinary deposit account: the employees' share of social insurance premiums of 30,000 yen withheld from last month's salaries, plus the same amount as the company's share. Which journal entry is correct?
Dr Social insurance premiums withheld (社会保険料預り金) 60,000 / Cr Ordinary deposit (普通預金) 60,000
Dr Salaries (給料) 30,000, Dr Social insurance premiums withheld (社会保険料預り金) 30,000 / Cr Ordinary deposit (普通預金) 60,000
Dr Social insurance premiums withheld (社会保険料預り金) 30,000, Dr Statutory welfare expenses (法定福利費) 30,000 / Cr Ordinary deposit (普通預金) 60,000
AnswerD. Dr Social insurance premiums withheld (社会保険料預り金) 30,000, Dr Statutory welfare expenses (法定福利費) 30,000 / Cr Ordinary deposit (普通預金) 60,000
The correct entry reduces Social insurance premiums withheld (a liability) by the 30,000 yen withheld from employees and records the company's 30,000 yen share as Statutory welfare expenses. Charging the full amount to Statutory welfare expenses leaves the withheld liability on the books and overstates the expense. Debiting the full 60,000 yen to the withheld account is wrong because only 30,000 yen was withheld, so the account would go negative. Debiting Salaries for the company's share confuses the employer's premium share with salary.
Q3 | Fixed asset tax
The company received a fixed asset tax (固定資産税) notice for its store building and land (annual tax 120,000 yen) and paid the first installment of 30,000 yen from its ordinary deposit account. Under the method used, the full annual amount is expensed when the notice is received, and the unpaid portion is recorded as a non-trade payable. Which journal entry is correct?
Dr Taxes and dues (租税公課) 120,000 / Cr Ordinary deposit (普通預金) 30,000, Cr Non-trade accounts payable (未払金) 90,000
Dr Taxes and dues (租税公課) 120,000 / Cr Ordinary deposit (普通預金) 30,000, Cr Income taxes payable (未払法人税等) 90,000
Dr Corporate, inhabitant and enterprise taxes (法人税、住民税及び事業税) 120,000 / Cr Ordinary deposit (普通預金) 30,000, Cr Non-trade accounts payable (未払金) 90,000
AnswerA. Dr Taxes and dues (租税公課) 120,000 / Cr Ordinary deposit (普通預金) 30,000, Cr Non-trade accounts payable (未払金) 90,000
The correct entry expenses the annual 120,000 yen as Taxes and dues, credits Ordinary deposit for the 30,000 yen paid, and credits the remaining 90,000 yen to Non-trade accounts payable. Fixed asset tax is an annual tax on owning property and is not part of a building's cost, so debiting Buildings is wrong. Income taxes payable is only for unpaid corporate, inhabitant and enterprise taxes, not fixed asset tax. The account Corporate, inhabitant and enterprise taxes covers taxes on profit, which do not include fixed asset tax. The account "unpaid fixed asset tax" (未払固定資産税) belongs to Grade 2; Grade 3 uses Non-trade accounts payable.
Q4 | Revenue stamps and postage stamps
The company bought revenue stamps (収入印紙) for 4,000 yen and postage stamps for 1,000 yen in cash, and used them right away. Which journal entry is correct?
Dr Communication expenses (通信費) 5,000 / Cr Cash (現金) 5,000
Dr Taxes and dues (租税公課) 5,000 / Cr Cash (現金) 5,000
Dr Taxes and dues (租税公課) 4,000, Dr Communication expenses (通信費) 1,000 / Cr Cash (現金) 5,000
Dr Taxes and dues (租税公課) 1,000, Dr Communication expenses (通信費) 4,000 / Cr Cash (現金) 5,000
AnswerC. Dr Taxes and dues (租税公課) 4,000, Dr Communication expenses (通信費) 1,000 / Cr Cash (現金) 5,000
The correct entry records the 4,000 yen of revenue stamps as Taxes and dues and the 1,000 yen of postage stamps as Communication expenses. Revenue stamps are used to pay stamp duty (印紙税) on documents such as contracts and receipts, so they are a tax. Charging everything to Communication expenses treats stamp duty like postage. Charging everything to Taxes and dues wrongly treats postage as a tax. The entry with 1,000 yen of Taxes and dues and 4,000 yen of Communication expenses swaps the amounts.
Q5 | Purchases and consumption tax
The company purchased goods for 200,000 yen (excluding tax) on account, together with consumption tax at 10%. Which journal entry is correct under the tax-exclusive method?
Dr Purchases (仕入) 200,000, Dr Provisional consumption tax paid (仮払消費税) 20,000 / Cr Accounts payable (買掛金) 220,000
Dr Purchases (仕入) 220,000 / Cr Accounts payable (買掛金) 220,000
Dr Purchases (仕入) 200,000, Dr Provisional consumption tax received (仮受消費税) 20,000 / Cr Accounts payable (買掛金) 220,000
AnswerA. Dr Purchases (仕入) 200,000, Dr Provisional consumption tax paid (仮払消費税) 20,000 / Cr Accounts payable (買掛金) 220,000
The correct entry records Purchases at the tax-exclusive 200,000 yen, the 20,000 yen of tax paid (200,000 × 10%) as Provisional consumption tax paid, and Accounts payable at the tax-inclusive 220,000 yen. Recording Purchases at 220,000 yen is the tax-inclusive method, not the tax-exclusive method used in Grade 3. Provisional consumption tax received is for tax collected on sales, not purchases. Consumption tax payable is for the net amount after offsetting at year-end; the full amount owed to the supplier, including tax, is Accounts payable.
Q6 | Settling consumption tax at year-end
At year-end, the balance of Provisional consumption tax paid is 180,000 yen and the balance of Provisional consumption tax received is 260,000 yen. Which journal entry correctly settles the amount of consumption tax to be paid?
Dr Provisional consumption tax paid (仮払消費税) 180,000, Dr Consumption tax payable (未払消費税) 80,000 / Cr Provisional consumption tax received (仮受消費税) 260,000
Dr Taxes and dues (租税公課) 80,000 / Cr Consumption tax payable (未払消費税) 80,000
Dr Provisional consumption tax received (仮受消費税) 80,000 / Cr Consumption tax payable (未払消費税) 80,000
The correct entry clears both Provisional consumption tax received (260,000 yen) and Provisional consumption tax paid (180,000 yen) to zero and records the 80,000 yen difference as Consumption tax payable (a liability). The reversed entry would increase both balances instead of clearing them. Debiting Taxes and dues is wrong: under the tax-exclusive method, consumption tax is collected and passed on to the government, not an expense. Reducing only 80,000 yen of the received account leaves 180,000 yen in both provisional accounts.
Q7 | Consumption tax payable amount
This year's sales were 3,500,000 yen and purchases were 2,100,000 yen (both excluding tax), and both were subject to consumption tax at 10%. There were no other taxable transactions. Using the tax-exclusive method, how much Consumption tax payable is recorded at year-end?
350,000 yen
210,000 yen
140,000 yen
560,000 yen
AnswerC. 140,000 yen
Provisional consumption tax received is 3,500,000 × 10% = 350,000 yen, and Provisional consumption tax paid is 2,100,000 × 10% = 210,000 yen. Consumption tax payable is the difference: 350,000 − 210,000 = 140,000 yen. 350,000 yen is only the tax collected on sales, and 210,000 yen is only the tax paid on purchases; neither offsets the other. 560,000 yen adds the two, but tax paid should be subtracted from tax collected.
Q8 | Interim payment of corporate taxes
The company filed its interim return for corporate, inhabitant and enterprise taxes and paid 450,000 yen from its ordinary deposit account. Which journal entry is correct?
Dr Corporate, inhabitant and enterprise taxes (法人税、住民税及び事業税) 450,000 / Cr Ordinary deposit (普通預金) 450,000
Dr Provisional payment of income taxes (仮払法人税等) 450,000 / Cr Ordinary deposit (普通預金) 450,000
Dr Taxes and dues (租税公課) 450,000 / Cr Ordinary deposit (普通預金) 450,000
Dr Income taxes payable (未払法人税等) 450,000 / Cr Ordinary deposit (普通預金) 450,000
AnswerB. Dr Provisional payment of income taxes (仮払法人税等) 450,000 / Cr Ordinary deposit (普通預金) 450,000
The correct entry records the interim payment as Provisional payment of income taxes (an asset). At the interim stage the annual tax is not yet known, so the payment is held as provisional and cleared when the annual tax is determined at year-end. Debiting Corporate, inhabitant and enterprise taxes records the expense before the annual amount is set. Taxes and dues is for taxes such as fixed asset tax and stamp duty, not corporate taxes. Income taxes payable is a liability recorded at year-end; it does not exist yet at the interim stage, so it cannot be reduced.
Q9 | Amount of income taxes payable
At year-end, corporate, inhabitant and enterprise taxes for the year were calculated as 840,000 yen in total. During the year, 380,000 yen was paid with the interim return and recorded as Provisional payment of income taxes. How much Income taxes payable is recorded at year-end?
460,000 yen
840,000 yen
1,220,000 yen
380,000 yen
AnswerA. 460,000 yen
The year-end entry is Dr Corporate, inhabitant and enterprise taxes 840,000 / Cr Provisional payment of income taxes 380,000, Cr Income taxes payable 460,000. The payable is the annual tax minus the interim payment: 840,000 − 380,000 = 460,000 yen. 840,000 yen is the annual tax without deducting what was already paid. 1,220,000 yen wrongly adds the interim payment. 380,000 yen is the amount already paid, not the amount still owed.
Q10 | Issuing new shares
A company increased its capital by issuing 100 new shares at 60,000 yen per share, and the full amount paid in was deposited into its checking account. Which journal entry is correct under Grade 3 treatment?
Dr Checking account (当座預金) 6,000,000 / Cr Capital stock (資本金) 3,000,000, Cr Legal retained earnings (利益準備金) 3,000,000
Dr Checking account (当座預金) 6,000,000 / Cr Capital stock (資本金) 6,000,000
Dr Capital stock (資本金) 6,000,000 / Cr Checking account (当座預金) 6,000,000
AnswerC. Dr Checking account (当座預金) 6,000,000 / Cr Capital stock (資本金) 6,000,000
The correct entry credits Capital stock with the total issue price: 60,000 × 100 shares = 6,000,000 yen. In Grade 3, whether at incorporation or a capital increase, the full issue price goes to Capital stock. Retained earnings brought forward represents profits kept in the company, not shareholder contributions. Crediting half to Legal retained earnings is wrong: leaving part of the payment out of capital (as capital reserve) is a Grade 2 topic, and Legal retained earnings is set aside when paying dividends. Debiting Capital stock reverses the entry and would decrease equity.
Q11 | Declaring a dividend
At the shareholders' meeting, a dividend of 300,000 yen out of retained earnings brought forward was approved. Legal retained earnings of 30,000 yen will also be set aside. The dividend has not yet been paid. Which journal entry is correct?
The correct entry reduces Retained earnings brought forward by 330,000 yen (the 300,000 yen dividend plus the 30,000 yen reserve) and records the unpaid dividend as Dividends payable (a liability). Crediting Dividends payable for only 270,000 yen wrongly cuts the shareholders' dividend by the reserve amount; the reserve is set aside in addition to the dividend. Crediting Ordinary deposit treats the dividend as paid when it has not been. Debiting Legal retained earnings and crediting 330,000 yen of Dividends payable decreases the reserve that should be increased and overstates the dividend.
Q12 | Retained earnings after a dividend
Retained earnings brought forward had a balance of 1,500,000 yen. The shareholders' meeting approved a dividend of 400,000 yen and setting aside 40,000 yen of Legal retained earnings. What is the balance of Retained earnings brought forward after this entry?
1,100,000 yen
1,060,000 yen
1,140,000 yen
1,460,000 yen
AnswerB. 1,060,000 yen
Retained earnings brought forward decreases by the dividend plus the reserve, 440,000 yen in total: 1,500,000 − 400,000 − 40,000 = 1,060,000 yen. 1,100,000 yen deducts only the dividend and forgets the reserve. 1,140,000 yen adds the reserve instead of deducting it (the reserve is transferred out of retained earnings). 1,460,000 yen deducts only the reserve and leaves out the dividend.
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