---
title: "Asset Capitalization"
space: "ERPNext"
url: "https://docs.frappe.io/erpnext/asset-capitalization"
updated: "2026-03-02"
---

**Asset Capitalization is a transaction used to combine stock items or existing Assets into a new composite Asset and capitalize all related costs.**

Example Scenario

A company is building a new production line. The production line consists of:

- Conveyor Belt (Stock Item)
- Industrial Motor (Stock Item)
- Control Panel (Stock Item)
- Installation Charges (Service Expense)

Instead of tracking these separately, the company wants to create a single Asset called **“Production Line – Plant A”** and capitalize all component and service costs into one composite Asset.

Asset Capitalization allows you to:

- Combine multiple stock items into one Asset
- Capitalize service and installation costs
- Merge multiple existing Assets into one new Asset
- Automatically generate the correct accounting entries

To access the Asset Capitalization feature, go to:

> Home > Assets > Maintenance > Asset Capitalization

## 1. Convert Stock Items into a New Composite Asset

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This is used when building a new Asset from inventory items.

### 1.1 Steps

- Go to Asset Capitalization and click New.
- Select the Target Asset (new composite Asset).
- Update if required:
  - Naming Series
  - Company
  - Finance Book
  - Posting Date
- In the Consumed Stock Items table:
  - Add stock items
  - Select Quantity and Warehouse
- Click Save and Submit.
- Open the newly created Asset.
- Set Depreciation Details (if applicable).
- Submit the Asset.

### 1.2 Accounting Effect

- The Consumed Stock Items will be reduced by the selected qty from the selected warehouses and the Warehouse Stock Accounts will be credited with the issued stock value amount.
- The system will first check if the target asset is in CWIP (Capital Work in Progress). If so, the CWIP account will be debited by the total value.
- Upon submission of the target asset, the CWIP account will be credited, and the corresponding Fixed Asset account will be debited.

![](/files/Screenshot 2026-01-11 at 11.22.10 PM.png)



## 2. Convert Stock Items and Capitalize Service Expenses

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This scenario includes service-related costs.

### 2.1 Steps

In addition to Consumed Stock Items, add:

- Service Expenses
- Corresponding Expense Accounts

### 2.2 Accounting Effect

- Service Expense Accounts are credited.
- Total Asset value includes:
  - Stock item value
  - Service expenses

All costs are capitalized together.

## 3. Convert Existing Assets into a New Composite Asset

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Used when multiple Assets are merged into one.

### 3.1 Steps

- Create a new Asset Capitalization.
- Select the Target Asset.
- Adjust Company, Finance Book, and Posting Date if required.
- Add Assets in the Consumed Assets table.
- Click Save and Submit.
- Set depreciation details for the new Asset.
- Submit the Asset.

### 3.2 Accounting Effect

When submitted:

- Consumed Assets are depreciated up to the Posting Date.
- Depreciation Journal Entries are created automatically.
- Asset status changes to Capitalized.
- Fixed Asset Accounts of consumed Assets are credited.
- If CWIP is used:
  - CWIP is debited initially.
  - On final submission, CWIP is credited and Fixed Asset account is debited.

![](/files/Screenshot 2026-01-11 at 11.29.23 PM.png)

## 4. After Submitting

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After completing Asset Capitalization:

- Stock quantities are reduced.
- Depreciation entries (if required) are posted.
- GL Entries are created automatically.
- The new composite Asset is ready for depreciation.