diff --git a/hrms/hr/doctype/full_and_final_statement/full_and_final_statement.py b/hrms/hr/doctype/full_and_final_statement/full_and_final_statement.py
index 2a465d1ed6..949fbb89e7 100644
--- a/hrms/hr/doctype/full_and_final_statement/full_and_final_statement.py
+++ b/hrms/hr/doctype/full_and_final_statement/full_and_final_statement.py
@@ -8,6 +8,17 @@
 
 
 class FullandFinalStatement(Document):
+	def on_change(self):
+		for payable in self.payables:
+			if payable.component == "Gratuity":
+				if frappe.db.exists("Gratuity", payable.reference_document):
+					gratuity = frappe.get_doc("Gratuity", payable.reference_document)
+					if self.status == "Paid":
+						amount = payable.amount if self.docstatus == 1 else 0
+						gratuity.db_set("paid_amount", amount)
+					if self.docstatus == 2:
+						gratuity.set_status(cancel=True)
+
 	def before_insert(self):
 		self.get_outstanding_statements()
 
diff --git a/hrms/hr/doctype/full_and_final_statement/test_full_and_final_statement.py b/hrms/hr/doctype/full_and_final_statement/test_full_and_final_statement.py
index ed5cae7949..1ea84f859c 100644
--- a/hrms/hr/doctype/full_and_final_statement/test_full_and_final_statement.py
+++ b/hrms/hr/doctype/full_and_final_statement/test_full_and_final_statement.py
@@ -34,7 +34,7 @@ def test_check_bootstraped_data_asset_movement_and_jv_creation(self):
 			"Leave Encashment",
 		]
 
-		receivable_bootstraped_component = ["Employee Advance", "Loan"]
+		receivable_bootstraped_component = self.fnf.get_receivable_component()
 
 		# checking payables and receivables bootstraped value
 		self.assertEqual([payable.component for payable in self.fnf.payables], payables_bootstraped_component)
diff --git a/hrms/payroll/doctype/gratuity/gratuity.py b/hrms/payroll/doctype/gratuity/gratuity.py
index ea7d80db31..0747513276 100644
--- a/hrms/payroll/doctype/gratuity/gratuity.py
+++ b/hrms/payroll/doctype/gratuity/gratuity.py
@@ -37,7 +37,7 @@ def gratuity_settings(self):
 
 		return self._gratuity_settings
 
-	def set_status(self, update=False):
+	def set_status(self, update=False, cancel=False):
 		status = {"0": "Draft", "1": "Submitted", "2": "Cancelled"}[cstr(self.docstatus or 0)]
 
 		if self.docstatus == 1:
@@ -47,17 +47,24 @@ def set_status(self, update=False):
 			else:
 				status = "Unpaid"
 
-		if update:
-			self.db_set("status", status)
+		if update and self.status != status:
+			if self.status != status:
+				self.db_set("status", status)
 		else:
 			self.status = status
 
+		if cancel and self.docstatus != 2:
+			self.db_set("docstatus", 2)
+
 	def on_submit(self):
 		if self.pay_via_salary_slip:
 			self.create_additional_salary()
 		else:
 			self.create_gl_entries()
 
+	def on_change(self):
+		self.set_status(update=True)
+
 	def on_cancel(self):
 		self.ignore_linked_doctypes = ["GL Entry"]
 		self.create_gl_entries(cancel=True)
diff --git a/hrms/payroll/doctype/gratuity/test_gratuity.py b/hrms/payroll/doctype/gratuity/test_gratuity.py
index f5da015f79..941a111e26 100644
--- a/hrms/payroll/doctype/gratuity/test_gratuity.py
+++ b/hrms/payroll/doctype/gratuity/test_gratuity.py
@@ -171,6 +171,52 @@ def test_gratuity_amount_consistent_irrespective_of_payment_days(self):
 		)
 		self.assertEqual(gratuity.amount, 190000.0)
 
+	@set_holiday_list("Salary Slip Test Holiday List", "_Test Company")
+	def test_settle_gratuity_via_fnf_statement(self):
+		from hrms.hr.doctype.full_and_final_statement.test_full_and_final_statement import (
+			create_full_and_final_statement,
+		)
+
+		create_salary_slip(self.employee)
+		setup_gratuity_rule("Rule Under Limited Contract (UAE)")
+		set_mode_of_payment_account()
+
+		# create gratuity
+		gratuity = create_gratuity(
+			expense_account="Payment Account - _TC", mode_of_payment="Cash", employee=self.employee
+		)
+		gratuity.reload()
+
+		# create Full and Final Statement and add gratuity as Payables
+		fnf = create_full_and_final_statement(self.employee)
+		fnf.payables = []
+		fnf.receivables = []
+		fnf.append(
+			"payables",
+			{
+				"component": "Gratuity",
+				"reference_document_type": "Gratuity",
+				"reference_document": gratuity.name,
+				"amount": gratuity.amount,
+				"account": gratuity.payable_account,
+				"status": "Settled",
+			},
+		)
+		fnf.save()
+		fnf.create_journal_entry()
+
+		# mark fnf as paid and submit it
+		fnf.status = "Paid"
+		fnf.save()
+		fnf.submit()
+
+		gratuity.reload()
+		self.assertEqual(gratuity.status, "Paid")
+
+		fnf.cancel()
+		gratuity.reload()
+		self.assertEqual(gratuity.status, "Cancelled")
+
 
 def setup_gratuity_rule(name: str) -> dict:
 	from hrms.regional.united_arab_emirates.setup import setup
@@ -201,6 +247,7 @@ def create_gratuity(**args):
 		gratuity.expense_account = args.expense_account or "Payment Account - _TC"
 		gratuity.payable_account = args.payable_account or get_payable_account("_Test Company")
 		gratuity.mode_of_payment = args.mode_of_payment or "Cash"
+		gratuity.cost_center = args.cost_center or "Main - _TC"
 
 	gratuity.save()
 	gratuity.submit()