Capitalization
You can use Project Accounting to accumulate costs for capital projects. When the project is complete, and the asset is built and ready to be placed in service, you can send the associated costs to Asset Management. This is where you can begin using and depreciating the asset. This process is referred to as capitalization in Project Accounting. For example, you can track construction costs for a new building or leasehold improvements in Project Accounting. When construction is complete, you can begin treating the building or improvements as assets.
Considerations for setting up
When you set up activities for capital projects, you need to define asset information for activities and account categories. This information is used to create assets from activities during the capitalization process. Consider these guidelines when setting up activities for capitalization:
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You can define asset information only for posting activities. You can define one set of asset information for all account categories associated with a posting activity, or you can define asset information by activity and account category. You should define asset information by activity and account category when different assets should be created, or different asset parameters apply.
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You can determine which account categories are eligible for capitalization on Override Account Category (AC06). For example, Moose Wood Outfitters cannot capitalize certain project costs, so they track them in a separate account category which is not flagged for capitalization.
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You can use combine codes to create one asset from multiple activities and account categories. See Combine codes.