[Question] Work in progress entries

[LGripper]

Good day

Could anyone please explain to me the entries for Work in Progress, I know I need to create a Work in Progress - Assets in my Balance sheet and a Work in Progress P/L account. However I am not sure how to process the various entries. We are not a construction company.

Thank you

[CLIVE-TRIANGLE]

I presume then that you are a manufacturing entity? Does your question relate to normal routine monthly entries, or for financial year end?

[LGripper]

Yes it is normal routine monthly entries. We do work for manufacturing companies, we do not hold inventory but we order goods in for each job and sometimes the costs will be incurred in one month but the job only completed and invoiced out in the next.

[CLIVE-TRIANGLE]

Simply put, if you are not presently accounting for work in progress, then you are expensing all supplies as an when they are incurred.

All that you need to do instead, is debit a work in progress (current asset) with all direct supplies.
When you invoice the customer, you in addition credit the work in progress account and debit cost of sales, Whether you name it cost of manufacture or cost of sales is irrelevant.

You should then also, on a monthly basis, reconcile or analyse the work in progress account by ensuring that the balance comprises identifiable costs of incomplete jobs.