How do you calculate retainage?
For example, if the complete project cost is $200,000 to be paid in five progress payments and the percentage to be retained is 5%, the calculation would be as follows: 200,000 x 0.05 = 10,000 total retainage amount. 10,000 divided by 5 = 2,000 retainage withheld from each progress payment.Dec 19, 2022.
How do you calculate retainage?
For example, if the complete project cost is $200,000 to be paid in five progress payments and the percentage to be retained is 5%, the calculation would be as follows: 200,000 x 0.05 = 10,000 total retainage amount. 10,000 divided by 5 = 2,000 retainage withheld from each progress payment..
How is retainage recorded?
Record retainage on the balance sheet.
The contractor, to whom the retainage is owed, records retainage as an asset.
The client, who owes retainage to the contractor, records retainage as a liability..
What does retaining mean in construction?
Retention is a percentage (often 5%) of the amount certified as due to the contractor on an interim certificate, that is deducted from the amount paid and retained by the client.
The purpose of retention is to ensure that the contractor properly completes the activities required of them under the contract..
What is retention in construction?
Retention is a percentage of payment held back typically by a client or main contractor under a construction contract to act as security, or an assurance that the project works will be completed and that defects which may subsequently develop are remedied..
What is the purpose of retainage?
What is 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 the retention of a building contract?
Retention is a sum, generally deducted at each monthly payment notice, to provide the client with some security that the contractor/sub-contractor will return to correct any defects during the defects period, defects correction period, or defects liability period..
- Retention receivable is recorded by general contractors and subcontractors and is the number of funds due from a contractor's customer for retention.
Because these funds aren't due until the project is completed, they are recorded in a separate account on the general ledger. - The retainer is included in Current Receipts on the Office Earnings report.
Retainers may be confused with retainage, which is an amount you withhold from billing a client, as a good faith measure to build trust in your company, or to entice the client to hire your company.
