Final answer:
CWIP stands for Construction Work in Progress, which refers to the costs incurred during the construction or development phase of a long-term project. These costs are capitalized and appear as a separate line item on the balance sheet.
Step-by-step explanation:
In accounting, CWIP stands for Construction Work in Progress, which refers to a specific type of expenditure. It includes the costs incurred during the construction or development phase of a long-term project. These costs are not immediately expensed but are capitalized as CWIP. Examples of expenditures that are capitalized to CWIP include the cost of materials, labour, and overhead directly associated with the construction project. For instance, if a company is building a new office building, the costs of purchasing building materials and paying construction workers would be capitalized as CWIP. CWIP is not typically included in the chart of accounts. Instead, it appears as a separate line item on the balance sheet under the non-current assets section. This is because CWIP represents an asset that is not yet completed and ready for use.