Track Construction in Progress and transfer to Land or Buildings

By Gregg Hopfeldt · 2025-05-20

Use the Construction in Progress category (often shortened to CIP) when you are still building or installing an asset and it is not yet ready for use. While an asset sits in this category, you keep adding costs to it, and no depreciation is calculated. Once construction is complete, you move the finished asset into its final category (typically Land, Buildings, or Leasehold Improvements) and depreciation begins from that date.

Before you start: make sure Construction in Progress appears in your category list under Settings → Depreciation Settings by Category. Its rate is 0% by default, which is correct for CIP.

Step 1 — Create the Construction in Progress asset

  1. From the register toolbar, select Smart Entry (or add a row directly).

  2. Set Category to Construction in Progress.

  3. Enter a clear Description (for example, "New warehouse — Site B").

  4. Set Purchase Date to the date you started incurring costs.

  5. Enter the Cost spent so far. If nothing has been spent yet, enter 0.

The row will show 0% depreciation and a book value equal to the cost — this is correct.

Step 2 — Keep updating the cost as construction progresses

Each time you incur more costs (progress payments, contractor invoices, materials), open the row and update the Cost cell to the new running total. Because the depreciation rate is 0%, the book value simply equals whatever total cost you have entered, and nothing is written off while the asset is still being built.

Tip: keep a simple log (date and amount of each payment) somewhere outside the Tool, so you can reconcile the total back to the supporting invoices at year-end.

Step 3 — Transfer to the final category when the asset is ready for use

Depreciation must only start when the asset is ready for its intended use, not the day you first started spending money. When construction is complete, you have two options.

Option A — Re-categorise the existing row (simplest)

Best when the entire build becomes a single asset (for example, a building with no separate land portion to split out).

  1. Open the Construction in Progress row.

  2. Change Category from Construction in Progress to Buildings (or Leasehold Improvements, etc.).

  3. Change Purchase Date to the date the asset became ready for use.

  4. Leave the Cost as the final total.

  5. Save. Depreciation will now begin at the new category's rate from the ready-for-use date.

Option B — Dispose CIP and create new rows (cleaner, recommended when splitting Land + Buildings)

Best when the build needs to be split into more than one asset — for example, Land (no depreciation) and Buildings (depreciated).

  1. Dispose the Construction in Progress row at its current book value (no gain or loss), using the ready-for-use date as the disposal date.

  2. Add a new row for Land — Category Land, Cost = the land portion, Purchase Date = ready-for-use date.

  3. Add a new row for Buildings — Category Buildings, Cost = the building portion, Purchase Date = ready-for-use date.

This gives the cleanest audit trail because the original CIP row remains visible as a disposed item, and the two new rows clearly show what came out of it.

Common issues

  • Depreciation started too early: the Purchase Date on the Buildings row must be the day the asset was ready for use, not the day construction started.

  • Cost does not match invoices: reconcile your running total to supporting invoices at each month-end before updating the Cost cell.

  • Re-categorised by mistake: if you change the category back to Construction in Progress, depreciation that was calculated under the new category will be removed on recalculation. Always confirm with Recalculate after re-categorising.

Next, review Recording asset disposals correctly if you plan to use Option B, or Set depreciation rates and methods to confirm the Buildings rate is correct.