What is Work in Process (WIP)?
The value tied up in jobs and products that are started but not yet finished.
Work in Process (WIP): definition
WIP sits between raw materials and finished goods (in manufacturing) or between costs incurred and revenue billed (in construction and project services). It represents real value you have created but not yet converted to a sellable or billable output, so it is carried on the balance sheet as an asset until the job is done.
- Accumulates direct materials, direct labor, and allocated overhead
- Manufacturing: partially built products between raw materials and finished goods
- Construction/services: costs on open jobs not yet billed or recognized
- Underpins percentage-of-completion revenue recognition on long jobs
How Fintra handles it
Fintra accumulates job and project costs into WIP by cost code, then releases them to cost of goods sold or recognized revenue as jobs progress. For long-duration jobs, WIP feeds percentage-of-completion recognition; for manufacturing, it flows to finished goods. The WIP schedule is reconcilable and reviewed at close.
Worked example
Frequently asked questions
Is work in process an asset?
Yes. WIP is a current asset representing the cost of value you have created but not yet finished or sold. It converts to finished goods (manufacturing) or to cost of goods sold / recognized revenue (projects) as the job completes.
What is the difference between WIP and finished goods?
WIP is partially completed - still being worked on. Finished goods are complete and ready to sell. Costs flow from raw materials, into WIP as production happens, and out to finished goods when the item is done.
How does WIP relate to percentage-of-completion?
On long jobs, accumulated WIP cost versus total estimated cost is the basis for the percent complete, which drives how much revenue you recognize. Accurate WIP is therefore essential to accurate revenue on construction and project work - Fintra ties them together.
How does Fintra track WIP?
Fintra accumulates materials, labor, and overhead into WIP by job and cost code, then releases it to COGS or recognized revenue as the job progresses, keeping a reconcilable WIP schedule that ties out at close.
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