How to Record Retention Receivables on Construction Progress Billings
How to account for the percentage of payment withheld by a client until project completion.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Accounts Receivable (Net) | Asset (+) | 9,000.00 | - |
| Retention Receivable | Asset (+) | 1,000.00 | - |
| Construction Revenue | Revenue (+) | - | 10,000.00 |
💡 Accountant's Note
Retention is common in Jordan's construction sector. Even though you haven't received the cash, you recognize the full revenue and split the receivable into current and non-current (retention) portions.
Practitioner & Systems Framework
💻 ERP Architecture
Configure your construction ERP (e.g., Sage 300 CRE, Viewpoint, or NetSuite) to automatically split out retention based on the contract terms (e.g., 10%) during progress billing generation. Maintain a separate Retention Receivable sub-ledger tracking balances by project and client. Reclassify from non-current to current asset when the project nears practical completion.
⚠️ Audit Flags
Auditors will test the aging and recoverability of retention receivables. They will check if retention release conditions (e.g., practical completion, end of defects liability period) have been met but cash remains uncollected, potentially requiring an Expected Credit Loss (ECL) provision. Premature release of retention liabilities to subcontractors is also heavily audited.
📄 Required Documentation
Signed construction contract detailing retention terms, approved progress certificate, client payment advice, and project completion certificate (for release).
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.