GPreparing a Running Account Bill: Step by Step
A running account bill pays a contractor for work done so far, less what was already paid and less the statutory deductions. Getting the sequence right is what keeps it clean.
From measurement to gross value
The bill starts in the measurement book. Each measured quantity is multiplied by its agreement rate to give the value of that item of work done to date, and the item values are summed to the gross value of work executed up to this bill. Because it is a running (part) bill, this gross value is cumulative — it is the total value of work done since the work began, not only since the last bill.
Any secured advance on materials or any price variation admissible under the agreement is brought in at this stage, clearly shown as a separate line rather than buried in the item rates.
Deducting previous payments and recoveries
From the cumulative gross value you deduct the total of all previous running-account payments so that the contractor is paid only the value added since the last bill. Then come the recoveries and statutory deductions — income tax at source, any GST treatment per the prevailing rules, the retention or security deduction, and recovery of any advance — each shown as its own line with its basis.
The order matters: compute the cumulative value first, deduct prior payments to get this bill’s value, then apply deductions to that. Mixing the order is the commonest arithmetic error that leads to over- or under-payment and later recovery.
The net payable and the check
What remains after previous payments and deductions is the net amount payable on this bill. Before it is passed, the bill is checked against the sanctioned estimate and the agreement: quantities should be within the sanctioned limits or supported by a revised sanction, and rates should match the agreement. A bill that exceeds the sanctioned quantity without a revised estimate is the classic audit objection.
A clean RA bill, therefore, is one where every quantity traces to a measurement, every rate traces to the agreement, every deduction shows its basis, and the whole thing sits within sanction. Each of those links is what an auditor follows.
Is the gross value in an RA bill cumulative?
Yes. A running bill shows the cumulative value of all work done since the work started. Previous running-account payments are then deducted so the contractor is paid only for the value added since the last bill.
What deductions are made on a running bill?
Typically income tax at source, applicable GST treatment, the retention/security deduction, and recovery of any advance — each shown as a separate line with its basis, applied after deducting previous payments.
What is the commonest audit objection on RA bills?
Paying for a quantity beyond the sanctioned estimate without a revised sanction, and rates not matching the agreement. Every quantity and rate must trace to a measurement and the agreement.