Accounting for a Project Under Construction
If a company is constructing a major project such as a building, assembly line, etc., the amounts spent on the project will be debited to a long-term asset account categorized as Construction Work-in-Progress.
Construction Work-in-Progress is often reported as the last line within the balance sheet classification Property, Plant and Equipment.
There is no depreciation of the accumulated costs until the project is completed and the asset is placed into service.
When the completed asset is placed into service, the project's accumulated costs will be removed from the Construction Work-in-Progress account and will be debited to the appropriate plant asset account.