How to do the Accounting of Advance and Retention money ?

How to do the Accounting of Advance and Retention money ?

How to do the Accounting of Advance and Retention money ?

How to do the Accounting of Advance and Retention money ?

Good control on Purchase, Sales, Stores, Site Stores, Accounts and Taxation

Finsys ERP is serving EPC companies in areas like (a) Engineering Construction , example Contractors of Water Pipelines for Thermal Power Plants (b) Contractors of Solar Power Plant EPC (c) Contractors of Steel Rolling Mill Machinery Manufacture and its all EPC activities.

EPC & Infrastructure


Accounting concept in Project Business

Accounting Manual

Formatted File – Download from link below

*Finsys project business accounting

Accounts to open

Advance accounts Supply 08 series
Erection 08 series
Freight 08 series
Main Debtor account Supply 16 series
Erection 16 series
Freight 16 series
Retention money 1 ( Installation) Supply 1710 series long term advance
Erection 1710 series long term advance
Freight 1710 series long term advance
Retention money 2 ( final ok ) Supply 1711 series long term advance
Erection 1711 series long term advance
Freight 1711 series long term advance

Project Summary

contract : Rs 50 crores

Supply 40.00
Erection 8.00
Freight 2.00
Total 50.00

Entries to be done  on Advance

Advance received Rs 10 crore
Now, we must divide this in parts
Supply 8.00 20% of the supply project
Erection 1.60 20% of erection
Freight 0.40 20% of freight
10.00
accounting entry
BankDebit 10.00
to NTPC – Singauli Supply Advance A/c 8.00 long term liability (08series)
to NTPC – Singauli Erection Advance A/c 1.60 long term liability (08series)
to NTPC – Singauli Freight Advance A/c 0.40 long term liability (08series)
( this account is opened in liability side of balance sheet,)
if made in 06 series, then we can have bill wise o/s also
if in 8 or 9 series
then bill wise outstanding will not happen  in Finsys

Entries to be done  on Invoicing

Now, when invoicing starts
First bill is sentRs 2 crore
and fact is that it is for supply
Supply 2.00
Erection –
Freight –
2.00
( this account is opened in Debtor side of balance sheet,) 16 series
Accounting entry
to NTPC – Singauli Supply Debtor MAIN A/cDebit 2.36 >16 series
To Sales Domestic 2.00 > income
to GST Payable ( IGST ) 0.36
Debtor closing at this stage
Net receivable 2.36 Crores against that bill at this stage

Entries to be done  on Adjustment of Advance

Now, adjustment of advance
adjust the advance, retention 1 , and retention 2
Base valueRs 2 crore
Advance was 20%
So adjustment is 0.40
adjust in which advance ?Supply 0.40
Erection –
Freight –
0.40
debtor
accounting entry 
NTPC – Singauli Supply Advance A/cDebit 0.40
to NTPC – Singauli Supply Debtor Main A/c 0.40
advance is adjusted, no problem
Debtor closing at this stage
Net receivable 1.96 Crores against that bill

Now, adjustment of Retention money – Part 1

Release against “Installation” and first QC report
This is 12% of the Basic value , as per the PO terms12%
Open this Retention mony  in 17 series, long term security deposit
NTPC – Singauli Supply Retention 1 A/c. Debit 0.24
to NTPC – Singauli Supply Debtor (main) A/c 0.24
advance is adjusted, no problem
( shipment was 2 crore, so above percent of that )
Debtor closing at this stage
Net receivable 1.72 Crores against that bill

Now, adjustment of Retention money – Part 2

Release against “Live testing”
This is 8% of the Basic value , as per the PO terms8%
Open this Retention money also  in 17 series, long term security deposit
NTPC – Singauli Supply Retention -PG Test Debit 0.16
to NTPC – Singauli Supply Debtor A/c 0.16
advance is adjusted, no problem
( shipment was 2 crore
Debtor closing
Net receivable 1.56 Crores against that bill

Voucher for TDS  income tax and TDS GST

TDSR- Itax Receivable – NTPC ( TAN ____ )Debit 0.04 (2% of 2 Crore )
TDSR- GST Receivable – NTPC ( GSTIN ____ )Debit 0.04 (2% of 2 Crore )
to NTPC – Singauli Supply Debtor A/c 0.08 debtor closing
1.48
( shipment was 2 crore so, 2% of that )

for the Formatted File for the Accounting entries can be Download from link below

Our Customers feel that Finsys ERP Software for project, inventory, sales, accounting and management is an extremely cost-effective construction (infrastructure) industry software solution that addresses all the financial accounting, departmental, tax compliance,  marketing, after sales, supplier, inventory and operational requirements of companies within this industry sector.

It is modular, flexible and powerful and its built-in scalability means that as your construction business needs increase, it will grow with you.

From goods-in to dispatch, .. Finsys ERP software promotes efficient inventory management and timely delivery. Large product catalogues are easily maintained and the system will automatically generate inter-site transfers, back-to-back orders and drop ship delivery instructions for non-stock items

User-friendliness, fast accessibility of data, intuitive ergonomics and transparent menu-structures are some of the most distinctive attributes of Finsys ERP.

Finsys ERP is useful for Engineering  Construction Industry, and Capital goods and Project Industry,  any type of Infrastructure Industry.

Finsys ERP has developed basic framework of software as customized project and later our system designing team has upgraded in advance Infrastructure ERP.

Our Management Information “Dashboards” provide the answers. Easily mastered, our software will give fresh insights into key performance measures for your business.

Note : Finsys does not plan to do the Microsoft Projects or ZOHO projects line of software, they are separate and remain separate

This page was to help you with Accounting  entries in the Projects Finsys Retention Money Advance set off