Journal Entry for Contract Retentions

[Shunmas]

Hi All !

Merry Xmas and Happy New year !

When the contractor bills the contractee (the principal, for whom the construction work is being done), he passes the following journal entry:

Accounts Receivables...Dr. $350,000
Billings on Construction in Progress ......Cr $350,000

Now if the contractee has held (retained 20%), what would be the journal entry in the books of Contractor ?

I know there will be Cash debit of $280,000. But what is the complete journal entry ?

Your help is highly appreciated.

Thank you

 

[Scalloway]

You would just have a balance on Accounts receivable of $70,000 which will be cleared when the retention is finally paid.

 

[Merchant UK]

almost sounds like a homework question

 

[Shunmas]

Yes @Merchant UK, its a homework question.

@Scalloway: Thanks for your reply. Okay, so it will be:

Cash...Dr. 280,000
Accounts Receivables...Dr. 70,000
Cr.....???

Credit is what ?

This part I am not getting. I appreciate your help.

 

[Merchant UK]

Yes @Merchant UK, its a homework question.

 

[Scalloway]

Cash...Dr. 280,000
Accounts Receivables...Cr. 280,000