@wfbrbutch wrote:
Contractor Edition; Ex., Total invoice for $50,000 less Retainage $5,000= $45,000. Retainage is sent to an asset account until invoiced. Payment received is $45,000. P&L on Cash basis shows the total amount of $50,000 as income. Why? This is incorrect. Any suggestions?
I at first though you meant that you received a "retainer" in advance, but I think you meant that the customer withheld $5k from their payment and they still owe you that amount.
If so I agree that your cash basis income s/be $45k and not the full $50k.
I believe the problem may be the way you recorded this: "Retainage is sent to an asset account until invoiced."
There is no reason to send anything to an asset account. You already have a balance in AR (which is an asset) of $5k. So if you send the $5k to an asset account, you are duplicating the asset.
You don't say how you sent the Retainage to an asset account, but whatever you did it is being picked up as income. If you delete this transaction - which you should do anyhow because it creates duplication - then you should have cash basis income of $45k
