Retentions held

Retentions held

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I have a question with regards to retentions held for work we have done.

My Directors opinion is that current retentions that are stopped should be shown in the P&L for that year, as the company has still incurred costs against that retention. I cannot see how this could be shown in the P&L because how would you then account for the money when you  receive it in the next financial year?

I would be grateful if anyone has knowledge of this and if any way this could be shown in the P&L.

Cheers

John

Replies (6)

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By Avant-Garde54
02nd Apr 2014 13:51

Retentions Held

The gross supplier invoice should be entered including the retention so that the full amount is entered on the profit and loss in the year the invoice was issued and this will leave the retention showing as creditor to the company on the balance sheet. When the retention is paid it will clear down the creditor balance.

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RLI
By lionofludesch
02nd Apr 2014 14:37

Debtors

Unless there are any known deductions to be made, this is just money which has been earned but isn't payable just now.

It's nothing more nor less than an ordinary trade debtor.

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By zebaa
02nd Apr 2014 15:04

And...

...when the debtor goes bust you can write it off as a bad debt.

Cynical? Me?

The big, big problem with retentions is they get 'lost' in one way or another. 

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RLI
By lionofludesch
02nd Apr 2014 15:10

No need to wait

Obviously, if there's a doubt, a provision can be made.

My experience is that, if retentions get lost, it's largely due to poor management by the subcontractor.

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By [email protected]
02nd Apr 2014 15:13

Retentions

Thank you for your comment.

I understand it being a debtor. However I should have mentioned that at there is an account in the BS (Other Current Asset) that was created a while ago to show how much retention is owed. Each month the new retentions has been posted to this account which will have an effect on the profit.

If I wanted to show the outstanding money owed I would need to change it to an Accounts Receivable account?

Regards

John

 

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RLI
By lionofludesch
02nd Apr 2014 16:31

Once

I'm not sure what the problem is now, but they should definitely be on the balance sheet once and once only.

Yet I'm reading that they're already there and the directors are wanting to include them again.

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