Gratuity Fund

[farazkpmg]

if a company is running a gratuity fund i.e defined benifit obligation fun and company had payed one employee by error through companys bank accounts. is this a non complience of any law.. if it is then kindly let me know!

[awaisaftab]

I think it is not non complience to any law but it is a mistake and you must have to correct it.

[Star]

Dear,

Its not non-compliance. The company is required to contribute to gratuity fund during the year or at year-end, when actuarial valuatio is done and there is shortfall in the plan assets.

You simply debit the gratuity fund acount in company books against the payment made directly by the company to employee..

In Company books;

Grautity fund - current account Dr
Bank Cr


In Fund books;

Accumlated fund Dr
Company - current account Cr



Regards,


*

[farazkpmg]

i dont think that it is correct entry bcoz the plan asset value is overstated due to this act...


i think gratuity fund should reimberce this amount to company...

[Star]

<blockquote id="quote"><font size="1" face="Verdana, Arial, Helvetica, san" id="quote">quote<hr height="1" noshade id="quote"><i>Originally posted by farazkpmg</i>
<br />i dont think that it is correct entry bcoz the plan asset value is overstated due to this act...


i think gratuity fund should reimberce this amount to company...



<hr height="1" noshade id="quote"></font id="quote"></blockquote id="quote">


Dear,

I am interested to know that how the plan assets would be overstated.

There exist a current account in the books of company as well as in the books of Gratuity Fund. This is used for such transactions.


Please correct me if i am wrong.

Regards,


*

[kamranACA]

Dears,

Enteries passed by Star are correct.

The valuation of plan assets and liabilities has to be done by actuaries. When such valuation will be made, actuary will point out the excess or shortage of plan assets over liabilities (if any).

Excess amounts of contribution (than suggested by actuaries) paid to the Fund (due to any reason) will stand as receivable from the Fund and may be adjusted against subsequent payments / contribution.

Regards,


KAMRAN.

[Shahzad09]

Dear all,

Please refer any useful textbook for accounting of Provident and Gratuity funds.

[dotkom]

roll

my two cents...

1- not a non-compliance
2- excess payment shall be adjusted with future payments
3- petiwala bookshop does have a book named "gratuity law" (but dont know any book in the market for its accounting)

ps all of these points have been covered by kamran and star...so ) i think i added nothing extra

peace

[Shirazi]

Dear Sir

1-Can we pay advance to the employees from their gratuity amount?
2-If we can pay,so where we should record the entry from Gratuity Payable a/c or creat a new account in GL Advance agains Gratuity or Advance from Gratuity?

Please guide

Shirazi