Retention Payable

Code: 2140
👁 Views: 199

Account Information

Financial Statement Statement of Financial Position
Normal Balance Credit

Definition

Retention amounts payable under contracts

Sub-accounts

2141

Retention from Customers

2142

Retention at Suppliers

📐 IFRS vs US GAAP Accounting Treatment

IFRS IFRS 15 Revenue from Contracts with Customers
US GAAP ASC 606 Revenue from Contracts with Customers

❓ Frequently Asked Questions

Q: What are Retention Payable?

A: Retention Payable are amounts withheld by a customer from a contractor\'s or supplier\'s invoices as a guarantee for proper contract performance. These amounts are released (paid) after the end of the agreed warranty period, which may be one year or more after project completion.

Q: How are retention payables recorded in the books?

A: When issuing an invoice to the customer, the entry is: Dr. Accounts Receivable (for the full invoice amount), Cr. Contract Revenue (for the non-retained portion), Cr. Retention Payable (for the retained portion). When the retention is released, the entry is: Dr. Bank Account, Cr. Accounts Receivable.

Q: Are retention payables considered a liability or an asset?

A: Retention Payable is considered a liability in the contractor\'s or supplier\'s books because it represents amounts to be received from the customer in the future after the warranty period ends. In the customer\'s books, retention is considered an asset (receivable).