Cost of work certified

All building contractors received payments periodically known as
“running payment” on the basis of the architect’s or surveyor’s certificates. But payments
are not equal to the value of the work certified, a small percentage of the amount due is
retained as security for any defective work which may be discovered later within the
guarantee period.
Mathematically :
Cost of work certified = Cost of work to date – (Cost of work uncertified + Material in hand
+ Plant at site)
The amount retained is called retention money. The full value of the work certified should
be credited to the Contract Account and debited to the account of the contract. Since the
cash received from him will be less, the balance in his account will be shown as an asset
in the balance sheet.