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In the context of accounting for long-term construction contracts, briefly explain the following terms: (i) Retention money (ii) Escalation clause

      

In the context of accounting for long-term construction contracts, briefly explain the following terms:
(i) Retention money
(ii) Escalation clause

  

Answers


Wilfred
1. Retention money
This is the amount retained by the client to be paid after the completion the contract. This is to account for any sub standard work or penalties payable due to late completion
2. Escalation clause
- This is a clause in the contract that allows for adjustment of contract the price due to changes in prices of raw materials and labor.
- The objective of the escalation clause is to protect both the client and contractor from unfavorable changes in prices
Wilfykil answered the question on February 11, 2019 at 08:01


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