Construction Bill Entry

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When constructing a new factory, purchases of materials and labour should be recorded in a 'Capital Work in Progress' (WIP) account. This accumulates costs until construction is complete. Upon completion, a journal entry is made to transfer the total WIP costs to the 'Factory Account', effectively capitalising the asset.

shalini

shalini (Querist)
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07 March 2020 Our company constructing new factory. There has been some construction material like interlocks have been purchased. What journal entry to be passed ?

Akash Monwani

Akash Monwani (Expert)
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07 March 2020 All material & Labour used in Construction should be accumulated in a account named Capital WIP and same will be capitalised when the construction is completed
JE will Be
Capital WIP Dr.
To Cash /Vendor

shalini

shalini (Querist)
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07 March 2020 Thanks for the reply. Would you please let me know what entry to be passed at the time of capitalisation ?

Akash Monwani

Akash Monwani (Expert)
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08 March 2020 At the Time of capitalisation the Capital WIP will be reversed and Factory A/c will come to existence

Factory A/c Dr.
To Capital WIP

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