Question

How is Gratuity Liability typically managed by employers?

a.

By paying out gratuity proceeds from the current revenue income.

b.

By setting up a Gratuity Fund and meeting the liability from the fund.

c.

By not offering gratuity benefits to employees.

d.

By using the employer's personal funds to pay gratuity.

Posted under IC 89 Management Accounting

Answer: (b).By setting up a Gratuity Fund and meeting the liability from the fund. Explanation:A prudent and tax-saving way of meeting Gratuity Liability is to ascertain such liability, set up by a Gratuity Fund, and meet liability from the fund as and when required.

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