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.
