Sunday, September 22, 2013

Gratuity Accounting in the books of Trust

At the outset, I apologize to all my readers for such a long gap between these two blogs.
In this part-2 on Gratuity Accounting, we will learn the accounting and various other aspects in the books of Gratuity Trust.
In the books of Gratuity trust, the main source of fund is contribution received from employer  company. This Fund is mainly used for investment as per the investment policy of Fund. At the time of retirement/ sepration of an employee, the gratuity amount is paid out of the Gratuity Fund.
The main source of income for gratuity trust is interest and dividend income. On the other hand, operating expenses include salary of trust staff, bank charges, professional fees etc.
Accounting Entries
The accounting entries in the books of Gratuity Trust will be as follows:
Date
Particular
Dr/Cr
Nature of Ledger
Amount
Payment Date
Bank A/c
Dr
Asset
100
Gratuity Fund-Contribution received
Cr
Contribution/Gratuity Fund
100

(toward contribution received from employer company)





Payment Date
Gratuity Fund-Settlement
Dr
Contribution/Gratuity Fund
1
Bank A/c
Cr
Asset
1




(towards payment made on separation of employee)









Accounting entries pertaining to investment (Asset), investment income (P/L item) and other operating expenses (P/L item) are simple as apply in case of other entities.
Under Source of Fund (in Balance Sheet), Gratuity Fund will be reflected as follows:
Particular
Amount


Opening Balance
Nil
 Add: Contribution  during the period
100



100


 Less: Settlements  made during the period
1


Closing Balance
99











Presentation of above Gratuity Fund is same like “Capital Account” in case of proprietorship firm.
I hope readers must have enjoy this entire series on Gratuity Acc. In case of any query, the readers can post their comment and I will try to resolve the same at the earliest.

Nalin Bhandari Chartered Accountant Cell:+919930018666

7 comments:

  1. In the books of Gratuity trust, the main source of fund is contribution received from employer company. This Fund is mainly used for investment as per the investment policy of Fund. At the time of retirement/ sepration of an employee. dottore commercialista milano

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  2. how to pass an entry for the interest earned in the books of the trust.

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  4. I liked reading these details about Gratuity Accounting. It was very useful for me. Even I am thinking to become a self-taught financial advisor and going to learn about various such things like gratuity rules, capital bonds and other investment options for employees and businessmen.

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  5. Sir.. thanks for the Explanation.. it was really helpful.. Also how do we account for Acturial Gain/ Loss, Interest Earned and settlement made from Fund.. Please help

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