Accounting for office interior fit-out costs involves collecting supporting documents, classifying expenses, recording costs during construction, and determining the appropriate accounting treatment after the project is completed. The applicable method depends on the office’s intended use, the company’s rights over the premises, the investment value, and the expected period of use.
These factors should be identified before costs are recorded. Applying the same accounting treatment to every project may result in incorrect account classification, incomplete documentation, or an allocation period that does not reflect actual use.
Main Categories of Office Interior Fit-Out Costs
An office fit-out project usually involves more than the amount stated in the main construction contract. A detailed cost list should be prepared during the budgeting stage so that the accounting team can apply a consistent tracking method throughout the project.
Design Costs
Design costs may include site surveys, space planning, technical drawings, 3D renderings, and construction documentation. Fees may be calculated by floor area, by individual scope of work, or according to an agreement with the design consultant.
The contract should clearly define the deliverables. Some quotations cover only the concept design and exclude electrical drawings, air-conditioning systems, fire protection systems, or documents required for construction approval.
Materials and Equipment Costs
This category includes construction materials, finishing materials, technical systems, and equipment installed in the office. Common items include:
- Partitions, ceilings, flooring, and wall finishes.
- Electrical, data, lighting, and air-conditioning systems.
- Meeting room equipment and access-control systems.
- Desks, chairs, storage cabinets, and fixed furniture.
- Decorative materials, signage, and branding elements.
The accounting team should distinguish consumable materials, permanently installed equipment, and assets that can be managed independently. This classification affects how each item is recorded, monitored, depreciated, or allocated after handover.
Labour and Subcontractor Costs
Labour costs may be calculated by working day, completed quantity, or lump-sum contract value. If the main contractor appoints separate subcontractors for electrical systems, air conditioning, data networks, or fire protection, the payment documents should clearly state the scope assigned to each party.
Actual quantities should be checked against both the approved budget and acceptance records. Any difference between these documents should be resolved before payment.
Construction Machinery and Tool Costs
This category covers the rental or operation of cutting machines, drills, scaffolding, lifting equipment, and other specialised tools. Depending on the contract, these costs may already be included in the contractor’s unit prices or listed as separate items.
When the company directly purchases tools for the project, it should determine whether they will be fully consumed during construction or retained for use after completion.
Construction Management and Approval Costs
In addition to design and construction expenses, a fit-out project in a leased office building may involve:
- Fit-out management fees charged by the building.
- Construction deposits.
- Electricity, water, and service-lift charges during construction.
- Inspection or supervision fees charged by building management.
- Drawing review and construction approval costs.
- Insurance, cleaning, and waste-removal expenses.
- Technical-system inspection and acceptance costs.
- Warranty and post-handover defect rectification costs.
These expenses should be included in the overall project budget rather than treated only as unexpected additions. The reference material also classifies project expenses into design, materials, labour, construction machinery, and general costs.
Process for Accounting for Office Interior Fit-Out Costs
The accounting process should be established alongside the construction plan. When the budget, acceptance documents, and accounting system use the same cost categories, the company can compare actual expenditure with the approved budget more accurately.
Step 1: Prepare a Detailed Cost List
Before construction begins, the company should prepare a complete list of expected expenses. The list may be divided by functional area or technical system, including:
- General work areas.
- Meeting rooms and management offices.
- Reception and client-facing areas.
- Pantry and auxiliary spaces.
- Electrical and lighting systems.
- Data networks and technology equipment.
- Air-conditioning and ventilation systems.
- Fire protection systems.
- Loose and fixed furniture.
- Management fees, approval costs, and contingency expenses.
Each item should have a tracking code, budgeted value, supplier, payment schedule, and required supporting documents. This structure reduces the risk of recording the same expense more than once or losing information about where a cost was incurred.
Step 2: Establish the Budget and Cost Calculation Basis
Design fees are commonly calculated according to floor area or the agreed design scope. Material costs are based on quantity, specifications, and unit prices. Labour costs may be calculated by completed quantity, working day, or lump-sum contract.
For equipment, the budget should include the purchase price, transportation, installation, and testing. Costs directly required to bring equipment into a condition ready for use should be tracked separately when determining the recorded asset value.
Contingency provisions should be based on the completeness of the design documents, potential material-price fluctuations, and the likelihood of scope changes. A fixed percentage should not be applied to every project without considering the actual construction conditions.
Step 3: Collect and Review Supporting Documents
Costs should only be recorded when the company has sufficient documents to verify the transaction and completed work. A typical documentation package includes:
- Contracts and contract appendices.
- Approved quotations or cost estimates.
- Site handover records.
- Work acceptance records.
- Payment requests.
- Valid invoices.
- Payment documents.
- As-built or completion documents.
- Contract liquidation records.
Invoice descriptions should correspond with the contract and acceptance records. When the design or construction quantity changes, the parties should prepare a contract appendix before acceptance and payment.
Step 4: Record Costs During Construction
While the project remains incomplete, expenses directly related to the formation of the fit-out work are generally accumulated and monitored separately. The reference material uses Account 2412 – Construction in Progress for these costs.
However, not every office interior investment should automatically receive the same accounting treatment. The company should assess:
- Whether the office is owned or leased.
- Whether an item forms part of the permanent construction or is an independent asset.
- Whether the company owns, controls, or has the right to remove the asset.
- The value and expected useful life of each item.
- Whether the expense creates a new asset or only repairs and maintains the existing condition.
- The remaining lease term and reinstatement obligations.
Step 5: Accept the Work and Determine the Final Project Value
After construction is completed, the company should conduct acceptance for each work category and for the project as a whole. The final value is determined from actual quantities, contractual unit prices, approved variations, and other amounts accepted by both parties.
The handover documents should state:
- The completion date and date of first use.
- The list of handed-over assets and equipment.
- The value of each category.
- The warranty period and coverage.
- Outstanding defects and the deadline for rectification.
- Technical documents, as-built drawings, and operating instructions.
The date on which the office or asset is put into use is an important basis for determining when management, allocation, or depreciation begins.
Step 6: Classify Costs After Completion
After acceptance, expenses should be treated according to the nature of each asset or work item. A single fit-out project may contain several accounting categories rather than being transferred entirely to one account.
The company may need to consider the following treatments:
- Recognition as fixed assets when all applicable conditions are met.
- Recognition as tools and equipment, followed by allocation over their useful period.
- Treatment as improvements to leased premises.
- Direct recognition as an expense during the period when the expenditure does not create an asset or qualify for allocation.
- Separate recognition of independently manageable equipment such as air-conditioning units, display screens, meeting room equipment, or access-control systems.
Accounting When the Company Manages Construction Internally
Some companies have internal technical teams and directly purchase materials, hire workers, or coordinate subcontractors. In this case, expenses arise from multiple sources and should be accumulated by work category.
Costs That Should Be Tracked
The company should maintain separate records for:
- Materials issued from inventory.
- Materials purchased and delivered directly to the construction site.
- Salaries and related costs of direct labour.
- Subcontractor expenses.
- Machinery and tool costs.
- Supervision, transportation, and cleaning expenses.
- Input value-added tax.
- Remaining or recovered materials after construction.
Inventory issue slips should identify the relevant project and area of use. For materials delivered directly to the site, a handover record should be signed by the supplier, construction representative, and acceptance team.
Internal Cost Control
Self-managed construction requires the company to control inventory, labour, and progress at the same time. Without a separate project code, materials may be recorded as normal operating expenses or become difficult to trace at the construction site.
At the end of each accounting period, the responsible departments should reconcile:
- Recorded expenses.
- Completed construction quantities.
- Accepted work values.
- Remaining materials.
- Unsettled advances.
- Outstanding balances with suppliers and subcontractors.
This reconciliation provides the basis for determining the value of incomplete work at the reporting date.
Accounting When an External Contractor Is Appointed
Hiring a main contractor is common when the office must be completed within a defined schedule. The contractor is responsible for labour, materials, and coordination of technical systems within the agreed contractual scope.
Advance Payment Stage
Advance payments should be tracked by contract and construction milestone. Supporting documents usually include the advance payment request, payment evidence, and an advance payment guarantee when required by the contract.
An advance payment does not mean that the company has accepted the full project cost. The value of work should only be recognised when acceptance documents satisfy the contractual requirements.
Progress Acceptance Stage
When a contract is divided into several payment milestones, each acceptance stage should identify:
- Completed work quantities.
- Value before tax.
- Value-added tax.
- The advance amount to be recovered.
- The amount retained for warranty obligations.
- The remaining amount payable.
Acceptance records should correspond with the bill of quantities or pricing appendix. A general description such as “office construction costs” may make it difficult to classify assets after project completion.
Final Account and Handover Stage
After overall acceptance, the parties complete the final account for the contract. If the final value has not been approved when the office is put into use, the company should determine a provisional recognition method and adjust the amount when the final figures become available.
Example of Tracking Office Fit-Out Costs
Assume that a company signs an interior fit-out contract with a value before tax of VND 600 million. The value-added tax stated on the invoice is VND 60 million, and the initial advance payment is VND 250 million.
The contract value is divided into:
- Materials: VND 400 million.
- Labour: VND 150 million.
- Project management: VND 50 million.
When the advance payment is made, the company tracks VND 250 million against the contractor’s payable balance. After receiving the invoice and accepting the full contract value, the total payable amount is VND 660 million, comprising VND 600 million before tax and VND 60 million in value-added tax.
After offsetting the advance payment, the remaining amount payable is VND 410 million. Once the project is handed over, the company should continue classifying the VND 600 million according to individual asset and expense categories rather than automatically recording the entire project under one accounting treatment.
For example:
- Desks, chairs, and movable cabinets may be managed as individual assets or groups of tools and equipment.
- Partitions, ceilings, flooring, and electrical systems should be assessed as improvements to the premises.
- Meeting room equipment may be separated when it can be independently managed.
- Repair costs that do not create an asset should be treated according to their actual nature.
Points to Review Before Recording Fit-Out Costs
Accounting records should reflect the actual nature of the construction project. Before transferring or allocating costs, the company should review the following matters.
Ownership and Control of Assets
For leased premises, the lease agreement should define the company’s rights to install, use, remove, and dispose of fit-out assets when the lease ends. Certain items may need to remain with the building owner or may not be removable from the premises.
These conditions directly affect the assessment of asset control and the period over which the investment is used.
Office Lease Term
The contract term and renewal options should be considered when determining the allocation period for leasehold improvements. When the actual operating period is shorter than the technical life of an item, the company should reassess the appropriate accounting period.
Early termination, relocation, and reinstatement clauses should also be considered during this assessment.
Asset Recognition Conditions
Assets should not be classified solely according to the description shown on an invoice. A single line described as “office furniture and fit-out” may include fixed assets, tools and equipment, leasehold improvements, and repair expenses for the current period.
After acceptance, the company should prepare an asset list stating the value, location, using department, date of first use, and responsible custodian for each item.
Value-Added Tax and Invoices
Input tax treatment depends on the company’s tax calculation method and the activities for which the assets are used. Invoices should correspond with the contract, acceptance schedule, and payment documents.
Payments to contractors, particularly high-value transactions, should meet the applicable payment-method requirements for tax declaration and deductible-expense purposes.
Premises Reinstatement Costs
Lease agreements commonly require tenants to restore the premises to their original condition at the end of the lease. The work may include removing partitions, dismantling electrical systems, repairing flooring, repainting walls, and removing construction waste.
These expenses are not included in the initial fit-out value but affect the total office occupancy budget. Reinstatement clauses should therefore be reviewed before the design is approved, particularly for permanent or difficult-to-remove installations.
Documents to Retain After Fit-Out Completion
A complete documentation package allows the company to explain the source of expenses, asset values, and the date on which the office was put into use. The records should include:
- Office lease agreement.
- Design and construction contracts.
- Appendices covering scope or quantity changes.
- Drawings approved by the building.
- Cost estimates and final accounts.
- Acceptance records for each stage.
- Overall acceptance records.
- Invoices and payment documents.
- Handed-over asset lists.
- As-built documentation.
- Records confirming that the assets have been put into use.
- Warranty documents.
- Contract liquidation records.
Documents should be stored under a project code and linked to the asset register in the accounting system. This structure reduces document retrieval time during inventory checks, tax finalisation, or office relocation.
Considerations When Preparing an Office Fit-Out Budget
The accounting process begins with the way the construction budget is prepared. When a quotation excludes fit-out management fees, technical systems, or building-specific charges, the accounting records will repeatedly exceed the approved budget.
Before signing a lease and beginning the design process, the company should clarify:
- The handover condition of the premises.
- Items already provided by the landlord.
- The building’s fit-out regulations.
- Available electrical and air-conditioning capacity.
- Requirements for modifications to the fire protection system.
- Fit-out management fees and construction deposits.
- Permitted construction hours.
- Acceptance and reinstatement requirements.
RSQUARE Vietnam is responsible for searching for premises, comparing lease options, and clarifying handover conditions before the company begins its interior fit-out. Information on floor area, existing condition, building fees, and construction requirements is consolidated for each option so that the operations, design, and finance teams can evaluate the premises using the same information.
Companies requiring updated vacancy information, handover conditions, or fit-out regulations for specific office buildings may contact RSQUARE Vietnam to receive a shortlist of available premises and arrange site inspections.
