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)

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)

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)

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)

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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