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