Hi my dear friends I need a help from you. How can we calculate the WIP? And most importantly what are the journal entries in relation to WIP? How it appear in the P&L a/c and balance sheet ? Kindly reply
Giridhar S Karandikar
(Team Lead)
(7543 Points)
Replied 05 December 2011
Suppose if you have incurred any direct/indirect expenditure on any project which remains incomplete before the year end, then all the expenses which you have incurred during the year will be shown as WIP and there will be NoProfit/No Loss. In case of construction contracts which take time to complete the projects all the expenses incurred on the project are shown as WIP & when the project is completed & the flats are ready for sale all the WIP is transferred to Finished stock.
There are no journal entries in respect of WIP. We have to prepare a statement of the total WIP till the year end & then enter the same in the system. The WIP is shown under Closing Stock of WIP to the credit of the P&L account & it shown in the B/S under the head Closing Stock & under that it is shown as WIP.
amit agarwal
(dept head)
(137 Points)
Replied 07 December 2011
WIP is nothing but the unfinished product remaining at the year end....cost incurred in respect of such product to shown as WIP in the credit side of P/l a/c and asset side of B/S under the head closing stock.....
Moreover you can pass a transfer entry for recording such WIP in the books by debiting the A/c head WIP and crediting purchased raw material and related expenses incurred till date...
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