Leave Encashment
This query is : Resolved
19 October 2008
What is leave encashment? Why provision is required for the same in books of accounts.
S.Srinivasaraghavan
(Expert)
20 October 2008
It is the compensation given to an employee for not fully availing his/her leave entitlement to his/her credit by virrue of the leave rules of the organisation. Obviously provision is required for unavailed leave as it is a cost to the organisation.
CA Bosu babu
(Expert)
23 October 2008
Companies will give certain leaves to the employees as per govt rules say sick leave, maternery leave ,etc...
but some time employees may not avail such leaves and would have worked on those days... so govt introducesd the LE for availing the untaken leaves. this will be calculated as per AS 15. so for that company has to provide provision for LE or employee benifits lik Gratuity,etc...
certain type of methods are there to calculate LE subject to AS 15. Now a days companies are giving employee details such as salary,DOB,DOJ,monthly AVg salary,promotion benifits etc to Acturiars for calculatuing LE and other employee benifits,. so Acturiars will calculate the LE liability payable to employees at a future date(which is retirement date or exist date on the basis of prudence) and discount it to the present date(year end of the company.31st mar)
and the same wil tell to company and company will pass the entry for that.....and collects the certificate from the valuer...
this is what normally happening now....
but some time employees may not avail such leaves and would have worked on those days... so govt introducesd the LE for availing the untaken leaves. this will be calculated as per AS 15. so for that company has to provide provision for LE or employee benifits lik Gratuity,etc...
certain type of methods are there to calculate LE subject to AS 15. Now a days companies are giving employee details such as salary,DOB,DOJ,monthly AVg salary,promotion benifits etc to Acturiars for calculatuing LE and other employee benifits,. so Acturiars will calculate the LE liability payable to employees at a future date(which is retirement date or exist date on the basis of prudence) and discount it to the present date(year end of the company.31st mar)
and the same wil tell to company and company will pass the entry for that.....and collects the certificate from the valuer...
this is what normally happening now....
S.Srinivasaraghavan
(Expert)
30 October 2008
In short after AS15 became compulsory, all employee benefits to be provided for.
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