An accountancy

Accountancy

Accountancy is the process of communicating financial information about a business entity to users such as shareholders and managers. The communication is generally in the form of financial statements that show in money terms the economic resources under the control of management; the art lies in...

 term, Construction in Progress (CIP) asset

Asset

In financial accounting, assets are economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset...

 or Capital Work In Progress entry records the cost of construction work, which is not yet completed (typically, applied to capital budget items). A CIP item is not depreciated

Depreciation

Depreciation refers to two very different but related concepts:# the decrease in value of assets , and# the allocation of the cost of assets to periods in which the assets are used ....

until the asset is placed in service. Normally, upon completion, a CIP item is reclassified, and the reclassified asset is capitalized and depreciated.

While costs are added to the construction in progress, related CIP account is debited with corresponding credits to accounts payable, accrued expenses, inventory, cash, and others. When the construction in progress is completed, related long-term asset account is debited and CIP account is credited.