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)
Please login or register to join the discussion.
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.
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.
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.
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.
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.