Retention Money in construction Project

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This query is : Resolved

Miraj Khan (Querist)

22 January 2011 My quesstion is that if there is Rs.100,000 of project, the companies retained some %age( e.g 10%)i.e 10000 of Money, what is the Accounting treatment ( Accounting Entries) for Retention money & the rest of the project Amount.
Is the Company Retained this money in Advance or Retained this Amount from every cheque they Pay during the project, when we Bill the Amount,e.g , we completed 50% and Bill the 50000 Amount, they will retained from this 50000 or in Advance?
Please Guide me through the process by Illustration, from Inception to the end?
Thanks

CA Shailesh Kumar Bhagat

CA Shailesh Kumar Bhagat (Expert)

22 January 2011 Retention is deducted as per mutual agreement.

Retention is treated as current liability " retention from creditors".

It cannot be treated as advance. It may be treated by you as outstanding.

Deduction schedule of retention is also depend on terms of contract, whole amount may be deducted from first bill or it may be deducted as per certain % from all the bill subject to maximum limit.

Miraj Khan

Miraj Khan (Querist)

24 January 2011 Respected Sir! I m Asking About the Accounting treatment ( Accounting Entry Only)of:
1) the retention money.
2)the Recipts ( what they pay agaist services)i.e What will be our Revenue Amount . its entry.
3) and the final amount when the project completed sustantially.

plz make the relevent entries only.
thanks
Mirajkhan
Abu Dhabi.

Miraj Khan

Miraj Khan (Querist)

24 January 2011

Respected Sir
CA Shailesh Kumar Bhagat !
A bundle of thanks for your reply, but i need further Guidance on the above Topic (Retention Money)Plz make the Relevant entry.
Thanks
Miraj Khan.
Abu Dhabi.

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