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What is Construction Work-in-Progress?

Author:
Harold Averkamp, CPA, MBA

Definition of Construction Work-in-Progress

Construction Work-in-Progress is a noncurrent asset account in which the costs of constructing long-term, fixed assets are recorded. The account Construction Work-in-Progress will have a debit balance and will be reported on the balance sheet as part of a company’s noncurrent or long-term asset section entitled Property, plant and equipment.

The costs of constructing the asset are accumulated in the account Construction Work-in-Progress until the asset is completed and placed into service. When the asset is placed into service, the account Construction Work-in-Progress will be credited for its balance (the accumulated costs) and will be recorded with a debit in the appropriate property, plant and equipment account.

Depreciation will begin after the asset is put into service.

Example of Construction Work-in-Progress

Let’s assume that a company is expanding its warehouse and the project is expected to take four months to complete. The company will open the account Construction Work-in-Progress for Warehouse Expansion to accumulate the many expenditures that will occur. When the project is completed, the company will transfer the amount from Construction Work-in-Progress for Warehouse Expansion to the asset account Warehouse Expansion.

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About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

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