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Radha
Radha
In: 1. Financial Accounting > Miscellaneous

Is capital work in progress a tangible asset?

Is capital work in progress a tangible asset?
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    1. PriyanshiGupta Graduated, B.Com
      2021-12-07T16:37:50+00:00Added an answer on December 7, 2021 at 4:37 pm
      This answer was edited.

      Yes, Capital Work in Progress is Tangible Asset.

      To attain an understanding of the same, we first need to understand what are tangible assets. Assets that have a physical existence, that is they can be seen, touched are called Tangible Assets.

      Capital work in progress is the cost incurred on fixed assets that are under construction as on the balance sheet date. Since the asset cannot be used for operation it cannot be classified as a Fixed Asset.

      For example:

      If an asset takes 1.5 years to be constructed as on 1.4.2020 then on the balance sheet date 31.3.2021, the cost incurred on the asset will be classified as Capital Work in Progress.

      Common examples of Capital Work in Progress include immovable assets like Plant and Machinery, Buildings.

      It is shown under the head Non-Current Assets in the balance sheet. Examples of cost included in Capital Work in Progress can be:

      • Advance payment to the contractor
      • Material used/purchased
      • Cost of labor incurred, etc.

      Since the assets under the head Capital Work in Progress are in the process of completion and not completed, hence they are not depreciable until completed. Once the asset is completed it is moved under the head Fixed Assets.

      Capital Work in Progress is shown in the Balance Sheet as:

       

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