Project accounting expense then capitalize for investment

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Posted on by Gilbert Khayat

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what's the best approach of moving some of the posted transactions such as expenses, hours, item to be capitalize.

at first these transactions are just hitting expense account however some of these posted transactions once they are known should be capitalized. would the best approach be through adjustment of these posted transactions or is there another way?

example: the project kicks off with R&D for a site once the R&D is complete and rcvd approval to move ahead the project should eliminate to a fixed asset. however during that R&D phase all transactions are P&L and then once the project is over or approved then those transactions are required to be capitalized.

this is an internal investment project

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David Massey on at

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You are going to need to provide more information to receive any helpful information.

Project types and posting setup affects when costs and revenue will show up on profit and loss statement, or is tracked on the balance sheet. E.g Is the project fixed price using completed percentage revenue recognition or completed contract? For time and material project are you recognizing base on "When Incurred" or "When Invoiced". Are you tracking work in process? Are you incurring cost and wanting to transfer them to a Fixed Asset? Standard processing of the transactions through invoicing will handle this for you.

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Gilbert Khayat 3,254 on at

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thank you David, I edited the question and added more information

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André Arnaud de Cal... 301,069 Super User 2025 Season 2 on at

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Hi Georgek,

In addition to the reply from David: What exactly do you mean with "once they are known"? Do you mean that when posting the transactions, you are not able to classify if the costs should be capitalized or not?

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David Massey on at

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Based on the revised information, It looks like you should be using and Investment project type which will allow you to transfer the cost to a Fixed asset at the completion of the revenue recognition process. This may not meet your requirements as cost for this project type are tracked on the balance sheet, not the profit and loss. They can be journalized to profit and loss, but the revenue recognition process will move them to the balance sheet.

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Gilbert Khayat 3,254 on at

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initially all transactions should not be capitalized until the R&D is complete. That said once the R&D is complete not all transactions should be capitalized its a selection of transactions. hope that makes sense?

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Gilbert Khayat 3,254 on at

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I don't think this will achieve what we are looking for. as this stage we are not going to use estimation to check progress we are just going to use estimation to eliminate to FA right away. I am think that transactions adjustment for the line property is the only approach?

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André Arnaud de Cal... 301,069 Super User 2025 Season 2 on at

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Hi Georgek,

I don't have the time to think of a best solution as I'm also enjoying my vacation now. For sure the line property adjustment will work. Probably you can also use project cost postings to move a balance from not capitalized to a capitalized line property for a total amount. Then you don't have to adjust possible many transactions, but only post a line to "reverse" not capitalized cost and a line for capitalizing the cost.

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Ludwig Reinhard Microsoft Employee on at

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Hi georek,

One possibility is - as you mentioned - making use of the project adjustment functionality.

An alternative is using an investment type project. If you like then you can setup this project (group) with a P&L ledger integration to record all costs initially in the income statement.

When you run the estimate at the end of your R&D process you can then specify a capitalization threshold where you define how much of your total costs will be shifted to your fixed asset. This requires that a so-called foreseeable loss category is setup in the investment project group. Probably test this feature and let us know if it works out for you.

Best regards,

Ludwig

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