Dear Sir,
We have taken a gratuity scheme from LIC first time, in Jan-21 and paid 65 Lacs Rs. and in the c/d statement they have given us 80000 Rs. interest on that amount as on 31.3.2021
I have not created any gratuity fund, whole 65 Lacs booked in expense
Now where to show the Interest earned in books
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Interest on Gratuity Scheme A/c ing
Replies (9)
This is your personal books I guess.
Taxable investment a/c
To Gratuity expense a/c
derecognised expense and recognised asset
Bank a/c
To Interest income a/c
interest received and put into bank.
This is Pvt Ltd co books
Ok fine, the same thing is applicable to this as well. First, rectify the error, then record interest transaction.
First rectify entry and create LIC Gratuity fund under grauity payable with rs 65 lacs
Dr lic gratuity fund
cr expenses you earlier created
than increase lic fund with interest amount and cr gratuity payable account as you have created provision of actual gratuity as per acturial
Dr lic gratuity fund
cr expenses you earlier created
than increase lic fund with interest amount and cr gratuity payable account as you have created provision of actual gratuity as per acturial
There is no acturial, do we need to have acturial report
Yes as you have to prepare balance sheet as per ibd as or AS whatever applicaple
Accounting entries in the books of the trust will be –
| Sr. No. | Transaction | Accounting Entry | Dr./Cr. |
| 1. | Receiving contribution | Bank A/c | Dr. |
| To, Gratuity Fund – contribution received A/c | Cr. | ||
| 2. | Investment entries | Investment A/c | Dr. |
| To, Bank A/c | Cr. | ||
| 3. | Income from Investment | Accrued Income / Bank A/c | Dr. |
| To, Income from Investment A/c | Cr. | ||
| 4. | Gratuity payment on retirement / separation | Gratuity Settlement A/c | Dr. |
| To, Bank A/c |
For accounting purposes, employer have to pass the below mentioned entries in their books of accounts:
| Sr. No. | Transaction | Accounting Entry | Dr./Cr. |
| 1. | Making contribution | Plan Asset A/c | Dr. |
| To, Bank A/c | Cr. | ||
| 2. | Year-end entry based on actuary report | Plan Asset A/c (Closing Balance – Opening Balance – Contribution) | Dr. |
| Expense A/c (Current service cost + Interest cost – Expected return on plan asset) | Dr./Cr. | ||
| Other comprehensive income (Net of actuarial gain/(loss) on obligation and plan asset) | Dr./Cr. | ||
| To, Defined Benefit Obligation (Closing Balance – Opening Balance) | Cr. |
Your actuary will give various information required in the above table for accounting entries.
Source: https://www.tyasuite.com/blog/post/gratuity-trust-and-related-accounting-and-compliances
Create accruals and reduce the accruals towards closing fund balance
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