provision for bonus

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mahavir (Querist)
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21 June 2008 a company is maintaining books on mercantile basis and entry for payment for bonus, gratuity,leave encashment are accounting on cash basic what is the auditor's responsibility. is it sufficient to disclose in notes on account that these expenses are accounted as and when paid.

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PC-www.bharadwajinstitute.com (Expert)
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21 June 2008 Auditor has to adivice the company that the bonus, gratuity and leave encashment are to be accounted on accrual basis.

Cash basis should not be followed....if it is followed you are violating AS 15.

The retirement benefits are classfied under two categories.

Defined contribution schemes

and Defined benefit schemes...

accounting should be done accordingly....if necessary actuarial valuation should be done..

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21 June 2008 .

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PC-www.bharadwajinstitute.com

PC-www.bharadwajinstitute.com (Expert)
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21 June 2008 If the company has violated already... you have to give a DISCLOSURE of violation of AS 15...