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Q4-Lesson-2

The document explains the concepts of gross and net earnings, detailing how to compute them and the differences between the two. It includes examples of calculating annual gross earnings and net earnings after legal deductions. The document also provides practice problems for students to apply their understanding of these concepts.

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flatunocutie
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3 views

Q4-Lesson-2

The document explains the concepts of gross and net earnings, detailing how to compute them and the differences between the two. It includes examples of calculating annual gross earnings and net earnings after legal deductions. The document also provides practice problems for students to apply their understanding of these concepts.

Uploaded by

flatunocutie
Copyright
© © All Rights Reserved
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Gross and Net Earnings

Learning Outcomes

At the end of the lesson, the students will be able to


• compute the gross and net earnings: and
• differentiate gross earnings from net earnings
In the previous lesson, you learned that an income is the total
amount that earn from their employment, business,
investments, and any professional services that they render.
Income pay also be derived from commissions, bonuses,
royalties, and other types of additional compensation like the
following

Overtime
Premium pay
Holiday pay; and
Night shift differential
The total amount that people earn for performing a specific
job during a specific period is also called their gross
earnings. For almost all employees, however, a part of their
earnings is usually taken out before they even receive their
take-home pay.

Employers withhold or deduct taxes and contribution for SSS,


PhilHealth, and Pag-IBIG. The resulting amount after the
deductions had been applied on the gross earnings is called
net earnings.
CALCULATING THE ANNUAL GROSS EARNINGS
Example #1
Pilong is an area manager in J & S Mart. He receives a
monthly salary of P25,000. He also owns a bond that has a
face value of P200,000 and that earns at an annual simple
interest rate of 6%. How much is his gross earnings in a year?
Solution
It was given that Pilong’s monthly salary is P25,000; hence his
yearly salary is:
Yearly Salary = 12(25,000) = 300,000
Also his P200,000 investment earns an annual simple interest
at rate of 6%; also his earnings from such investment can be
computed as follows
Earning From Investment = (0.06)(200,000) = 12,000
His gross earning in a year can be computed by adding his
total salary and his earnings from his investment, that is
Yearly Gross Eranings = 300,000+12,000 = 312,000
Therefore, Pilong’s gross earnings in a year is P312,000.
Example #3
As a sales agent, Amlong earns a basic monthly salary of
P22,000 plus a 12% commission on his total monthly sales. His
total sales in a particular month was P30,000. In the same
month, Amplong worked 2 holidays. His employer entitles an
employee twice the daily rate if the employee works during a
holiday. How much was the total amount of his gross earnings
then? Assume that there are 22 working days that month.
To determine Amlong’s total gross earnings that month,
we need to consider three things-his basic salary, his monthly
commission, and his extra pay for working during 2 holidays.
It was a given that his monthly basic salary is P22,000.
Since there are 22 working days, his daily rate can be
computed as follows:
Daily Rate = 22,000 22 = 1,000
It was also mentiones that he would receive twice a daily
rate if he works during a holiday. This means that he will get
an additional pay of P1,000 for each holiday; so for the 2
holidays, his pay can be computed as follows:
Extra Pay for the 2 Holidays = 2(1,000) = 2,000
His commission that month is 12% of his total sales of
P30,000, that is,
Commission = (0.12)(30,000) = 3,600
His total gross earnings can be computed by adding his salary,
his extra pay for the 2 holidays, and his commission; that is
Gross Earnings = 22,000 + 2,000 + 3,600 = 27,600
Therefore, the amount of his gross earnings that month is
P27,600.
COMPUTING NET EARNINGS
By law, employers are required to withhold taxes and other
legal deductions from their employees salaries and to forward
theses to the concerned government agencies. Earlier we
defined net earnings as the resulting amount after the
deductions are applied on the gross earnings. The formula for
computing the net earnings is stated below.
Formula
N=G–d
where
N = net earnings
G = gross earning
d = total legal deductions
Example #1
An employee has a monthly salary of P10,000. His legal
deductions are the following: P363 for SSS premium, P125 for
Philhealth, P200 for Pag-IBIG fund, and P500 for the income
tax. How much is his earnings a month?
The total deductions (d) can be comjputed by adding the
following amounts: P363 for SSS, P125 for PhilHealth, P200 for
Pag-IBIG fund, P500 for the income tax. So we have:
d = 363 + 125 + 200 + 500 = 1,188
The amount of his gross earnings (G) is given as P10,000. So
the net earnings can be computed as follows:
N = G – d = 10,000 – 1,188 = 8,812
Therefore, the employee’s net earnings is P8,812
Example #2
Pilong works a call center agent. After his employer
deducted P726 for his SSS premium, P250 for PhilHealth, P400
for Pag-IBIG, and P1,000 for his income tax, he received an
amount of P17,624 as net earnings. How much is his monthly
gross earning?
We are asked to determine the monthly gross earnings of
Pilong. The amounts of his deductions were given in the
problem: P726 for SSS, P250 for PhilHealth, P400 for Pag-IBIG,
and P1,000 for his income tax. So the deduction (d) can be
computed as follows:
d = 726 + 250 + 400 + 1,000 = 2,376
It was also given that the amount of his net earning (N) was
P17,624. So from the formula for net earnings (N = G - d), we
can derive the following formula for G, and then known values
of N and d: that is
G = N + d = 17,624 + 2,376 = 20,000.
Therefore, Pilong’s monthly gross earnings is P20,000.
Activity
Solve the following

1. A bank teller has monthly salary of P12,000. Her employer


deducts a total of P1,200, from her salary for her SSS,
PhilHealth, and Pag-IBIG contributions. How much is her
monthly net earnings?
2. Gracia received her net earnings worth of P9,500.50. If the
total amouny of her deduction in a month was P850.50,
how much was her monthly gross earning?
3. Dominic works as a computer technician and earns a
monthly salary of P15,000. If his net earnings in a certain
month was P13,500, how much was his total deductions
4. Richard works as a manager in Jo’s Hardware where he
earns a monthly salary of P20,000. Also, he invested in a bond
that has face value of P300,000 and earns at an annual simple
interest rate of 5%. How much is Richard’s grows earning in a
year?

5. As a sales agent, Ashton has a basic monthly salary of


P17,000 plus a commission of 155 of his total sales in a
month. If his total sales was P25,000 last month, how much
was his gross earning?

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