Journal Entry For Retainer Fees

 

A retainer fees is an advance payment paid to professionals such as lawyers, freelancers, consultants, accountants, etc by clients in order to secure the service or to cover upfront costs or initial costs of starting a project. Any excess amount is refunded to the clients upon completion of the specified work performed or project completed by the professionals. While any deficit amount is requested from clients for the project done.

The journal entry recorded for the professional firm, who received the payment from clients in advance against the services which are still to be rendered, is shown below:

 

                                          Cash a/c  XXX

 

                                                       Unearned Retainer Fees a/c  XXX

 

                                       (Retainer Fees Received In Advance From Client)

 

Unearned retainer fees is a Current Liability for the firm as it is not actually earned by it i.e., still the services are not rendered to the clients.

When the firm actually completed the project, then now the company earned the retainer fees revenue. The following entry is recorded as shown below:

 

                                                     Cash a/c  XXX

  

                                                                   Retainer Fees Earned a/c  XXX

 

                                              (Retainer Fees Earned For The Period)