About Updates to GL for Retainage
When you apply retainage to an invoice, release retainage that has been held, or place released retainage back on hold, the system updates the General Ledger accounts accordingly.
When you post an AP transaction to which you have applied retainage (US), retention (AU) or holdback (CA), the system automatically creates entries in General Ledger for the retainage/retention/holdback portion of each transaction. Once you release retainage/retention/holdback or when you place released retainage/retention/holdback back on hold, the system updates the appropriate GL accounts. This includes the ITC Contra accounts used for GST/PST (for companies in Australia and Canada).
The following details the General Ledger distributions for retainage transactions.
United States
Example: You enter an Expense transaction for $1000, with 10% retention and 7% sales tax (calculated on the invoice total).
| Line Gross: | $1000 |
| Retainage: | $100 |
| Tax Basis: | $1000 |
| Tax Amount: | $70 |
| Invoice Total: | $1070 |
| Debit | Credit |
|---|---|
| Job Expense Account $1070 | AP Account $970 |
| Retention Payable Account $100 |
When you release the retainage, the system updates GL as shown below. This example shows a full release of $100.
| Debit | Credit |
|---|---|
| Retention Payable Account $100 | AP Account $100 |
If you place the released retainage back on hold, the system updates GL as follows:
| Debit | Credit |
|---|---|
| AP Account $100 | Retention Payable Account $100 |
Australia
Example: You enter an Expense transaction for $1000, with 10% retention and 10% GST/PST (net of retention).
| Line Gross: | $1000 |
| Retainage: | $100 |
| Tax Basis: | $900 |
| Tax Amount: | $90 |
| Invoice Total: | $900 |
Once you process the batch, the system creates the GL entries as follows:
| Debit | Credit |
|---|---|
| Job Expense Account $1000 | AP Account $990 |
| Standard ITC Account $90 | Retention Payable Account $100 |
| Retention ITC Contra Account $10 | Retention ITC Payable Account $10 |
| Debit | Credit |
|---|---|
| Retention Payble Account $100 | AP Account $110 |
| Standard ITC Account $10 | |
| Retention ITC AP Account $10 | Retention ITC Contra Account $10 |
If you place the released retention back on hold, the system updates GL as follows:
| Debit | Credit |
|---|---|
| AP Account $110 | Retention Payable Account $100 |
| Standard ITC Account $10 | |
| Retention ITC Contra Account $10 | Retention ITC Payable Account $10 |
For detailed information about tracking Retention ITCs, see Retention Input Tax Credits: Australia.
Canada
Example: You enter an Expense transaction for $1000, with 5% holdback and 10% GST/PST (net of holdback).
| Line Gross: | $1000 |
| Retainage: | $100 |
| Tax Basis: | $900 |
| Tax Amount: | $92.16 |
| Invoice Total: | $992.16 |
| Debit | Credit |
|---|---|
| Job Expense Account $1042.40 | AP Account $992.16 |
| Standard ITC Account $54 | Holdback Payable Account $100 |
| Holdback ITC Contra Account $6 | Holdback ITC AP Account $6 |
| Credit GL Ret/Hbk Account $4.24 |
| Debit | Credit |
|---|---|
| Holdback Payable Account $100 | AP Account $110.24 |
| Standard ITC Account $6 | |
| Holdback ITC AP Account $6 | Holdback ITC Contra Account $6 |
| Credit GL Ret/Hbk Account $4.24 |
If you place the released holdback back on hold, the system updates GL as follows:
| Debit | Credit |
|---|---|
| AP Account $110.24 | Holdback Payable Account $100 |
| Standard ITC Account $6 | |
| Holdback ITC Contra Account $6 | Holdback ITC AP Account $6 |
| Credit GL Ret/Hbk $4.24 |
For detailed information about tracking Holdback ITCs, see Holdback Input Tax Credits: Canada.
