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Gratuity Trust and accounting

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Rakeshwar Nath Mishra

Finance Professional

22 Points Posted on 05 May 2023

Hi,

Can some one explain the correct accounting of Gratuity, if Company has a gratuity trust and Company has shared funds in Bulk to an insurance company, which has partly invested the funds in income earning investments and partly has kept funds to pay the gratuity liability arising in the company due to resignation/separation of employees.

Company also goes for annual valuation of gratuity fund through actuary..

Replies (2)

Quick Summary

This discussion clarifies the accounting treatment for employee gratuity when a company has established a gratuity trust. It covers scenarios where funds are transferred to an insurance company for investment and to cover gratuity liabilities. The process involves annual actuarial valuations to ensure proper provision is made for gratuity expenses, which are deducted from gross pay.

Yasaswi Gomes new

Finance

3328 Points Posted on 06 May 2023

Gratuity is an expense and subtracted from gross pay. I didn't go through employee benefits in as standards and I'll get back later on when I have time. I have gratuity problems and you can find them online with government compliance.