Ra bills

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Querist : Anonymous

Querist : Anonymous (Querist)

06 January 2014 WHAT IS MEAN BY RA BILLS IN CONSTRUCTION ACCOUNT AND HOW IT IS ACCOUNTED IN BOOKS...??

CA Kedar Sakhardande

CA Kedar Sakhardande (Expert)
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06 January 2014 R A Bills is nothing but Running Account Bills

Normally in case of project invvoicing pattern is fixed by a contract wherein (in most cases) there is advance payment for site mobilisation. and then there are several running account bills based on progress completion (also known as progress billing) This RA billing is either on physical completion (actual measurement) or some event.

Normally advance payment is deducted prorata from progress billing (which together can be taken as revenue subject to meeting of other criteria such as AS-7 )

Again from each billing there can be a clause for retntion (for defect liability period) Retention amount can be taken as revenue only when it is certain (either defect liability period is over OR contractee waives retention right OR Retention guarantee is provided by contractor)

You must try to make budget for each project and ensure compliance with AS-7

I hope, I have tried to explain clearly to the xtent possible

Regards

Querist : Anonymous

Querist : Anonymous (Querist)

07 January 2014 OK SIR THANKS I GOT THAT CONCEPT...BUT CAN U PLEASE ELABORATE WITH AN EXAMPLE SIR..??

Aashok Kumar Sharma

Aashok Kumar Sharma

(Expert)
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19 July 2025 Example:
Contract Details:

Total contract value: Rs. 10,00,000
Advance payment: Rs. 1,00,000 (paid at the start for site mobilisation)
Retention: 5% of each RA bill (held back until defect liability period ends)
Transactions during the project:

1st RA Bill:
Work completed worth Rs. 3,00,000
Advance adjustment: Rs. 1,00,000 (adjusted against 1st RA bill)
Retention @ 5% on Rs. 3,00,000 = Rs. 15,000
Net payable = Rs. 3,00,000 - Rs. 1,00,000 (advance) - Rs. 15,000 (retention) = Rs. 1,85,000
Accounting Entry:

Dr Debtor (Contractor) Rs. 3,00,000
Cr Work-in-progress/Revenue Rs. 3,00,000
Dr Advance from Customer Rs. 1,00,000
Cr Debtor Rs. 1,00,000
Dr Debtor Rs. 15,000
Cr Retention Money Liability Rs. 15,000
Dr Bank Rs. 1,85,000
Cr Debtor Rs. 1,85,000
2nd RA Bill:
Work completed worth Rs. 4,00,000
Retention @ 5% = Rs. 20,000
No more advance adjustment
Net payable = Rs. 4,00,000 - Rs. 20,000 = Rs. 3,80,000
Accounting Entry:

Dr Debtor Rs. 4,00,000
Cr Work-in-progress/Revenue Rs. 4,00,000
Dr Debtor Rs. 20,000
Cr Retention Money Liability Rs. 20,000
Dr Bank Rs. 3,80,000
Cr Debtor Rs. 3,80,000
Retention Release:
After defect liability period, if retention money is released, the company will debit Retention Money Liability and credit Revenue or Bank (if paid).
Summary:
RA bills recognize revenue progressively based on work done.
Advance payments are adjusted against RA bills.
Retention money is withheld as a liability until certain conditions are met.

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