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    Managing Retainage in Oracle Apps R12

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    KarthikRamaswamy
    Retainage is a percentage of payment withheld from a subcontractor until certain work milestones are met. Oracle Payables calculates and tracks retainage amounts separately from invoice payments. While the full invoice amount is recorded as a project commitment and actual cost, retainage is treated as a deferred liability until released upon work completion. Releasing retainage results in moving the amount from the retainage to payables account, but does not affect project costs since the full amount was already recorded.

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    Managing Retainage in Oracle Apps R12

    Uploaded by

    KarthikRamaswamy
    441 views4 pages
    Retainage is a percentage of payment withheld from a subcontractor until certain work milestones are met. Oracle Payables calculates and tracks retainage amounts separately from invoice payments. While the full invoice amount is recorded as a project commitment and actual cost, retainage is treated as a deferred liability until released upon work completion. Releasing retainage results in moving the amount from the retainage to payables account, but does not affect project costs since the full amount was already recorded.

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    Managing Retainage in oracle apps R12

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    Managing Retainage in oracle apps R12

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    Retainage is a percentage of payment withheld from a subcontractor until certain work milestones are met. Oracle Payables calculates and tracks retainage amounts separately from invoice payments. While the full invoice amount is recorded as a project commitment and actual cost, retainage is treated as a deferred liability until released upon work completion. Releasing retainage results in moving the amount from the retainage to payables account, but does not affect project costs since the full amount was already recorded.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    441 views4 pages

    Managing Retainage in Oracle Apps R12

    Uploaded by

    KarthikRamaswamy
    Retainage is a percentage of payment withheld from a subcontractor until certain work milestones are met. Oracle Payables calculates and tracks retainage amounts separately from invoice payments. While the full invoice amount is recorded as a project commitment and actual cost, retainage is treated as a deferred liability until released upon work completion. Releasing retainage results in moving the amount from the retainage to payables account, but does not affect project costs since the full amount was already recorded.

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    Managing Retainage

    Retainage is an agreed upon amount, typically a percentage, that you


    withhold from a subcontractor until the subcontractor makes predetermined
    progress for a particular scope of work. Retainage is also known
    asretention or contractual withholds. For example, the contract can specify
    that you will retain 20 percent from all payments until 25 percent of work is
    complete. Therefore, whenever the subcontractor sends you an invoice, you
    retain 20 percent of each payment until the overall progress reaches 25
    percent.
    Oracle Payables automatically calculates the retainage amount for a supplier
    invoice based on the retainage rate and maximum retainage amount that
    you specify on the purchase order header in the Buyer WorkCenter in Oracle
    Purchasing. It stores the retainage amount as a separate distribution line
    with a distribution line type of Retainage. Oracle Payables has one retainage
    account it uses for each operating unit. Retainage invoice distribution lines
    can be project-related.
    Oracle Projects does not report on or interface project-related retainage
    distribution lines as commitments or actual costs. Instead, Oracle Projects
    captures the full amount of the expense as a commitment and, when
    applicable, for the funds check. Later, the full amount of the expense is
    interfaced to Oracle Projects as an actual cost. Retainage is related to the
    payment of the invoice and it ultimately does not have an impact on the
    overall project cost.

    Retainage and Accrual Basis Accounting Example


    The following example illustrates the flow of accounting for a project-related
    invoice with a retainage distribution line.
    Purchase Order Retainage Percentage: 9.2%
    Contract Term: Retain 9.2% from all payments until 25% of work is
    complete.
    You create an invoice matched to the purchase order for $100.00 and Oracle
    Payables calculates a retainage amount of $9.20. The following table shows
    the resulting accounting. All amounts are in US Dollars.
    Account

    Debit

    Expense Account

    100.00

    Credit

    Payables Liability Account

    90.80

    Retainage Account (Deferred Liability)

    9.20

    After you validate the invoice and create accounting for the invoice, you
    interface the actual costs to Oracle Projects. The process PRC: Interface
    Supplier Costs interfaces a total actual cost of $100.00. With accrual basis
    accounting, the timing of the payments does not affect when you can
    interface the actual costs to Oracle Projects.
    Later, the subcontractor completes 25% of the work and you release the
    amount that you previously retained. A total of $9.20 is released. The
    following table shows the resulting accounting. All amounts are in US Dollars.
    Account

    Debit

    Retainage Account (Deferred Liability)

    9.20

    Payables Liability Account

    Credit

    9.20

    In this example, the release of the retained amount has no affect on the
    actual costs in Oracle Projects because you previously interfaced the full
    $100.00 as actual costs.
    Note: If an invoice is associated with non-revoverable tax, then the process
    PRC: Interface Supplier Costs interfaces the portion of the non-recoverable
    tax that is associated with the retaininge to Oracle Projects after you release
    the retained amount, validate the retainage release invoice, and create
    accounting for the invoice.

    Retainage Release Invoice Concept and it's Accounting Entry Oracle Payables

    Thisinvoiceisusedtoholdsomeportionofamountfromthe
    supplierPayment.Theremainingwillbepaidtosupplieronlyat
    thecompletionofthetotalwork.
    SetupSteps:
    1. EnterRetainageAccountatFinancialOptions.

    2. EnterRetainagePercentage(%)atSupplierlevelinInvoice
    ManagementTab.
    3. CreateComplexServiceAgreementsPOinPurchasing
    Module.
    4. CreateaStandardInvoicebymatchingwithabovecreated
    ComplexServiceAgreementPO.
    5.MakePaymentforaboveStandardInvoice.
    6.WhenContracttheiscompleted,ReleasetheRetainage
    PercentageamountbycreatingRetainageReleaseInvoice
    bymatchingwiththePO.
    7.MakepaymentforRetainageInvoice.
    AccountingEntries:
    WhenInvoiceismatchedwithStandardInvoice:
    AccrualA/c.........................Dr.
    ToLiabilityA/c.............Cr.
    ToRetainageA/c............Cr(PickfromFinacial
    Options)
    ForMakingPaymentforStandardInvoice:
    LiabilityA/c........................Dr
    ToCashClearingA/c.........Cr
    WhenRetainageInvoiceisCreated:
    RetainageA/c.......................Dr
    ToLiabilityA/c....................Cr.
    ForMakingPaymenttoRetainageInvoice:
    LiabilityA/c.......................Dr
    ToCashClearingA/c..............Cr.

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