Home > Accounting Entries > Assets > Capital Work-In-Progress
Definition:
Capital Work-In-Progress relates to long term capital assets which requires significant amount of time for construction and deployment for usage in ordinary course of business. Costs related to construction of long term capital assets such as Office Building and Machinery are accounted under this head during the intermediate tenure of the asset until it is constructed and put to use.
Capital Work-In-Progress residing in the financial assets needs to be assessed for Impairment due to technological changes or risk of obsolesce. Any impairment loss is to be computed and booked upfront. Once the asset is put-to-use, the amount held in this heading is capitalised and depreciation expense is recognised from the new capitalised category.
Accounting Entries:
Costs incurred for construction (before put to use):
Capital Work-In-Progress A/c DR
Cash/Bank A/c CR
Amount: Costs incurred during the term.
Capitalisation of costs incurred till date:
Capital Asset A/c DR
Capital Work-In-Progress A/c CR
Amount: Cumulative amount of costs incurred till date for particular asset.
Identification of Impariment Loss:
Impairment Loss A/c DR
Capital Work-In-Progress A/c CR
Amount: Impairment loss identified on the project.