CMA Intermediate · Cost Accounting · Contract Costing
A contractor, Shree Constructions, has a contract price of Rs 50,00,000. Work certified is Rs 30,00,000 and cash received is Rs 27,00,000, being 90% of work certified. What is the retention money?
Retention money is Rs 3,00,000. It is the portion of work certified that the contractee withholds, calculated as certified work of Rs 30,00,000 less cash received of Rs 27,00,000, equal to 10% of the certified value.
- ARs 3,00,000Correct
- BRs 5,00,000
- CRs 20,00,000
- DRs 2,70,000
Explanation
Retention money is the part of work certified not paid in cash: 30,00,000 - 27,00,000 = Rs 3,00,000, which is 10% of certified work. Rs 20,00,000 is uncertified contract value, a different concept.
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