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.
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
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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
