What is Construction Work-in-Progress?

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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