Gratuity

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DHIREN (Querist)
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27 October 2014 sir I want to ask about gratuity provision. suppose we have made provision of Rs . 100 . But as per actuarial valuation it is 90 . so now we have to reduce provision amt by 10 . If yes than what entry we have to pass. thanks in advance.

CA R SEETHARAMAN

CA R SEETHARAMAN (Expert)
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27 October 2014 The entry is

Provision for gratuity Dr 10
To provision written back cr 10

@VaibhavJ

@VaibhavJ (Expert)
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27 October 2014 Hi

You may not reverse if amount is not material enough & also considering situation on valuation date.

E.G. Valuation done as on March 14 in Aug 14, where in between Mar & Aug discount rate got reduced, so there is higher liability in future, so reversing liability may require you to provide additional provision in next FY.

Thanks

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