Retentions Held by Customers

Code: 1177
👁 Views: 254

Account Information

Financial Statement Statement of Financial Position
Normal Balance Debit

Definition

Amounts withheld by customers from sums due to the company under contract terms, such as performance retentions. They remain within other receivables until the contractual release procedure is completed, such as acceptance of the work or expiry of the warranty period, and are then collected from the customer.

Common Journal Entries

Deduct retention from customer billing

Dr. Accounts Receivable
Dr. Retention from Customers
Cr. Contract Revenue

Collect retention after warranty period

Dr. Bank Account
Cr. Retention from Customers

Write off retention due to dispute

Dr. Bad Debt Expense
Cr. Retention from Customers

Transfer retention to regular receivables

Dr. Local Customers
Cr. Retention from Customers

Deduct retention from customer billing

Dr. Accounts Receivable
Dr. Retention from Customers
Cr. Contract Revenue

Collect retention after warranty period

Dr. Bank Account
Cr. Retention from Customers

Write off retention due to dispute

Dr. Bad Debt Expense
Cr. Retention from Customers

Transfer retention to regular receivables

Dr. Local Customers
Cr. Retention from Customers

📐 IFRS vs US GAAP Accounting Treatment

IFRS IFRS 9 Financial Instruments
US GAAP ASC 405 Liabilities

❓ Frequently Asked Questions

Q: What are retentions from customers?

A: Amounts withheld by the customer from the contractor's dues as a performance guarantee, becoming payable after the warranty period.