- Who holds Retainage?
- What is a retainage fee?
- How is Retainage calculated?
- How long is retainage held?
- How do you account for retention?
- What is retention receivable?
- What type of account is Retainage?
- What is Retainage on a balance sheet?
- Is retention an asset?
- What is the difference between retention and retainage?
- How do you bill Retainage?
Who holds Retainage?
Retainage is the withholding of a portion of the funds that are due to a contractor or subcontractor until the construction project is finished.
It is meant to serve as a financial incentive and an assurance that the contractor will complete the project in a satisfactory manner..
What is a retainage fee?
Retainage is a portion of the agreed upon contract price deliberately withheld until the work is substantially complete to assure that contractor or subcontractor will satisfy its obligations and complete a construction project.
How is Retainage calculated?
Retainage or retention can be: a fixed percentage of the contract – such as 10% of the value of the contract. a variable rate – such as 10% of the contract until the contract is 50% complete; at which time it is then reduced to 5% a variable rate – such as retainage is held at 10% on labor and 0% on materials.
How long is retainage held?
45 daysRetainage is held until 45 days after formal acceptance of the work. The department shall not retain funds if the contractor furnishes a retainage bond equal to 10 percent of the contract amount for projects less than $500,000 or 5 percent of a contract exceeding $500,000.
How do you account for retention?
The following steps explain how to record a retention based on the example above.Record the full value of the invoice less the amount of retention using the invoice date.Record the value of the retention as an invoice using the due date of the retention.Post the customer receipt for the full amount less the retention.More items…•
What is retention receivable?
Accounts receivable retention refers to money the customer holds back that they’ll eventually pay to the contractor. Accounts payable retention is the money the contractor retains until disbursing it to subcontractors.
What type of account is Retainage?
For example, Retainage Receivable (money owed to you) should be set up as an Other Current Asset in your Chart of Accounts. Retainage Payable (money you owe) on the other hand, should be set up as an Other Current Liability account.
What is Retainage on a balance sheet?
September 01, 2019. Retainage is a portion of a contract’s total price that is withheld until project completion. This withholding is intended to ensure that the quality of the contractor’s work is adequate.
Is retention an asset?
Retainage as a component of the contract asset When the condition to complete the job must be fulfilled before there is an unconditional right to receipt of retention and that the receivable is conditional on more than just the passage of time, then retention receivable is a component of the contract asset.
What is the difference between retention and retainage?
Retainage, also called “retention,” is an amount of money “held back” from a contractor or subcontractor during the term of a construction project. This is a very unique practice specific to the construction industry, but within the industry, it’s extremely popular.
How do you bill Retainage?
ResolutionGo to Accounts Receivable, Tasks, Bill Retainage.In the Customer box, type the customer ID or click List to select from a list of customers.If you are billing retainage by contract, type the contract and contract item in the appropriate boxes.More items…•