Construction Work-in-Progress is a The construction-in-progress functionality lets us accumulate expenses over time before they are recorded as fixed assets. For example, during construction, costs are collected, and then, once completed, these expenses are capitalized and recorded as fixed assets. This non-current asset account in which the costs of constructing long-term, fixed assets are recorded. The costs associated with CIP are capitalized and recognized as assets on the balance sheet until the construction project is completed.
Depreciation will begin after the asset is put into service.
New GL are available in chart of account under Non tracks construction costs, which are capitalized until the project is finished, with depreciation starting once the asset is in use.
New GL is available in the chart of accounts under Non-current asset > Property, Plant, and Equipment.
The GL accounts can added in the default chart of accounts of Fixed asset.
Available in the version above 2.1.1.19
The ability to work with these accounts was added to documents that are used for expense recognition: Invoice Received (the Expenses tab), Employee Expense Report (the Expenses tab), Loan Agreement, Processing of Current Loans, Inventory Write Off, Bank Payment, Cash Payment, Cheque Issued, and Other Expenses.
Let's create an example with this functionality-
Create a new invoice received document, and fill the required tab as usual, 4.2.3. Invoices Received. On the tab services tab, choose the Cost of Construction in Progress GL account for recording and set the fixed asset as the cost object.
Once posted with the required details, it created the below entry
DR Construction in the progress of property, plant, and equipment
CR Current trade payables
Once construction is finished and ready for capitalization, create a fixed asset entry. Make sure to enable the "Construction in Progress Accounting for Fixed Assets" option in Administration > Settings > Asset Management to add the construction-in-progress tab to the fixed asset entry document.
Fill the document as required 12.2.1. Fixed Asset Entries,
- Click "Calculate CIP Costs" to aggregate all costs from the Construction in Progress GL account.
- The amount calculated from CIP Costs will be reflected as both the initial and depreciation costs in the fixed asset tab. Add the other required details i.e. useful life, if it should be accepted for depreciation or be appreciated in the current month, and post the document.
Once posted, the below entry will be created-
DR Fixed assets at Cost
CR Construction in the progress of property, plant, and equipment
This amount will be further used for depreciation.
You can check the overall details in the below report, it will show how these costs changed during the specified period for the fixed assets under construction. Expense items reflect the structure of costs. You can filter the data by entity, fixed asset, or expense item.
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