How to Allocate Plant Depreciation to Project WIP
Charging a project with its share of plant depreciation based on machine hours used.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Work-in-Progress (WIP — Plant Cost) | Asset (+) | 5,000.00 | - |
| Accumulated Depreciation (Plant) | Contra-Asset (+) | - | 5,000.00 |
💡 Accountant's Note
Depreciation of owned plant is allocated to specific projects based on hours of utilization. This ensures each project bears its fair share of the equipment cost.
Practitioner & Systems Framework
💻 ERP Architecture
Run depreciation in the Fixed Asset module. Set up an allocation rule that takes the depreciation expense and redistributes it to Project WIP accounts based on equipment log hours or assigned location for the month.
⚠️ Audit Flags
Idle capacity. If equipment sits idle, depreciation must still be recorded but should hit P&L (Under-utilized plant expense) rather than being capitalized into WIP of inactive projects.
📄 Required Documentation
Fixed asset depreciation schedule, monthly equipment hour logs, and allocation journal.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.