AsthaLeader In: 1. Financial Accounting > Accounting Terms & Basics What is capital work-in-progress? What is capital work-in-progress? Capital Share Facebook You must login to add an answer. Username or email* Password* Captcha* Remember Me! Forgot Password? Need An Account, Sign Up Here 1 Answer Voted Recent Simerpreet Helpful CMA Inter qualified 2021-05-30T15:01:53+00:00Added an answer on May 30, 2021 at 3:01 pm This answer was edited. As per Wiki, it is also called construction in progress. Capital work in progress is a non-current asset of an entity. It is also known as CWIP in short. CWIP is the work which is not yet completed but the amount for which has already been paid. Suppose, at the time of preparing a balance sheet, if an asset is not completed, all the costs incurred on that asset up to the balance sheet date are to be transferred to an account called capital work in progress. Example 1: A machinery under installation. There are several expenses incurred while installing machinery, expenses such as labor charges, Initial delivery and handling costs, Assembly and installation cost, etc are included in CWIP and when the asset is completed and is ready to use, all the costs are transferred to the relevant accounts. To make it simpler, let me show journal entries relating to this example. When an expense is incurred/paid: When an asset is complete and put to use: Example 2: A Contractor is constructing a building. The following expenditures are being incurred to date: i) Raw materials – 5,00,000 ii) Payment to Architect – 3,50,000 iii) Advance for Equipments – 1,50,000 Following accounting entries will be passed to record the expenditure on CWIP assets: The following accounting entry will be passed once assets are ready to use: Disclosure in the Balance sheet CWIP account is shown separately in the balance sheet below the fixed asset. we cannot depreciate capital work in progress. It can only be depreciated when the asset is put to use. 0 Share Share Share on Facebook Share on Twitter Share on LinkedIn Share on WhatsApp Related Questions Is 'Reserve Capital' a Part of 'Unsubscribed Capital' or 'Uncalled Capital'? Capital account is which type of account?