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Dear All,

Could you guide me on Accounting of Capital WIP?

I know something about it as mentioned below. Pl check whether it is correct & rectify wherever necessary.

1) Capital Asset under construction also referred to as Capital work in

progress (CWIP)

2) An internal order is normally used as an interim collector of costs and an aid to

the planning, monitoring, and controlling processes needed.

3) When the job has been completed, you settle the costs to one or more receivers (cost centre, fixed asset, and so on).

4) Here I am not clear how accounting will take effect.

5) Normally we incur RM cost, Labour, Mach purchase, Construction Cost in relation to Asset under Construction. So is it the case that we collect all these costs on the Investment Internal Order? So which GL Account should be used to collect these costs? It must be a Capital WIP Account. So through which Tcodes we post the entries? In case of Material Purcahse for Capital WIP, should we create Capital material Stock Account?

6) Our CAP WIP activity gets over. We have collected all the cost On capital WIP & on the Internal Order. So how to move this cost to the Actual Asset which has come into existence?

Should we credit to the Capital WIP & debit to the Relevant Asset? Is it possible?

Or should we settle the Internal Order to the Relevant Asset? In this case what will happen to the amount collected on the Cap WIP Account?

I am very much confused. Pl help.



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