What Type of Account Is Construction in Progress? (CIP)

Construction in progress (CIP) is a fixed asset account — the holding pen where a build’s costs accumulate until the asset is ready for use. Not an expense, not inventory, and not depreciated. Yet.

The classification, precisely

CIP = long-term asset (property, plant & equipment section). Costs of constructing an asset — materials, labor, permits, capitalizable interest — are debited to CIP as incurred. No depreciation while in CIP: depreciation begins when the asset is placed in service, at which point the balance transfers to the proper asset account (Building, Equipment…).

The lifecycle in three entries

The distinction people trip on

CIP (building an asset for yourself) is not WIP (building for a customer). A contractor constructing a client’s warehouse runs the costs through work-in-progress and contract accounting; a company constructing its own warehouse uses CIP. Same hammers, opposite balance sheets — the full contractor-side treatment lives in our construction chart of accounts guide. The audit attention CIP attracts has one source: an asset that isn’t depreciating and isn’t finished is a comfortable place for costs to hide, which is why aging CIP balances get questioned.

FAQ

What type of account is construction in progress? A long-term (fixed) asset account within property, plant and equipment — costs accumulate there until the asset is placed in service.

Is CIP depreciated? No — depreciation begins only when construction completes and the balance transfers to the final asset account.

What’s the difference between CIP and WIP? CIP is constructing an asset for your own use; WIP is production or contract work being built for customers.

What costs go into CIP? Directly attributable construction costs — materials, labor, permits, professional fees, and capitalizable interest during the build.