CAPITAL WIP

[govind_gogate2]

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.

Thanks,

Gov

[Former Member · Accepted solution]

Hi,

For collecting Cost for final assets and costs you need to use different account! Then you can use in the settlement rule (profiles) how you want to post. In the config you can set-up how you make the postings. (Maintain Allocation Structures, <b>Maintain Source Structure</b> and Maintain Settlement Profiles)

Paul

[Former Member]

Hi,

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

progress (CWIP ---<b> Right</b>

2) ) An internal order is normally used as an interim collector of costs and an aid to the planning, monitoring, and controlling processes needed. --<b> Right</b>

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

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

When you collect costs for CWIP through internal order the accounting entries are

For example wages paid on CWIP, Accounting entry

Dr. Wages Cr. Bank account -

---

(need to give internal order number also)

It was collected in internal order, when you settle internal order

The accounting entry is Dr. AUC Cr. Wages

When you made final settlement of order

The accounting entry is Dr. Main Asset Cr. AUC

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?

You can use FB50 for posting of these entries.

I think it is needed to maintain a separate stock account for material purhased for CWIP

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?

<b>Yes</b>

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?

If you collect the costs through internal order costs will be posted to relevant assets automatically,when you settle internal order (KO88)

See this link

https://www.sdn.sap.com/irj/sdn/profile?userid=3644529

Radha

[govind_gogate2]

Hi radha,

Thank you very much for the detailed reply. Also thanks for continuing with the flow of the question as it helped me to understand the ans easily.

I have still some questions in my mind. Being very busy in BBP preparation, I shall come to this again after some days.

Do reply then.

Pl put this que on your watch list.

Thanks again

Gov