Accounting for retainage payable involves the tracking of amounts that are held back from contractors and suppliers until a project is completed. This type of accounting is governed by Generally Accepted Accounting Principles (GAAP). Under GAAP, accounts receivable (AR) should be debited for the amount withheld as a retainage, and an accounts payable (AP) should be credited for the same amount. When the job is finished and the retainage has been paid, the AR should be credited and the AP should be debited. This ensures that the contractor or supplier is properly compensated and that the retainage holds no surprises. Keeping accurate records of retainage payable is essential in order to maintain financial compliance and accuracy.