Accounting treatment of gratuity

As per law or Gratuity Act 1972 it is defined as the amount payable to any employee employed in any establishment .

Now accounting treatment for gratuity is providing for gratuity .
The calculation is on the basis of last drawn salary.
Actually employers pay as mentioned in the gratuity act.
basis salary plus deafness allowance multiplied completed years of service multiples by 15 /26

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We make provision for gratuity at year end.

Gratuity Dr 

To provision for gratuity (long term & short tern)

 

When the employee leaves, the provision account is debited and bank is credited.