/ / Work in progress in accounting in the enterprise

Incomplete production in business accounting at the enterprise

Each commercial enterprise strives to ensure that,so that there are no downtime in his work that could adversely affect financial results. Such uninterrupted work assumes that at the end of the reporting period, there is some residual work in processing. The correctness of calculating the value of finished products directly depends on how well the volume of unfinished products is correctly determined. It is important to be able to evaluate these data correctly, because they depend on the size of tax payments and many other indicators.

What is work in progress

inventories in work in process

By definition, work in process isproducts, goods or products that have not passed all the necessary processing steps provided for them by technology. Thus, the following types of products can be considered:

  • raw materials and semi-finished products, the processing of which has already been started with the goal of converting them into finished products;
  • incomplete products;
  • goods that have not passed technical acceptance or necessary tests;
  • Completed works (services) that have not yet been accepted by the customer.

In other words, work-in-progress inaccounting - this is the cost of production costs (materials, consumed resources, depreciation, accrued wages to employees) and other expenses for products, the production of which has already begun, but at the reporting date has not yet been completed.

This amount of costs collected at the end of the period is notis written off to other accounting accounts, and remains on the corresponding production account (for example, 20 or 23). And even if there was no production in the reporting period, but costs were incurred, then such costs would be counted as incomplete production. Subsequently, they will be attributed to the cost of finished products. Even the enterprises that trade or provide services and produce no products are faced with the notion of "work in progress". The costs incurred during the reporting period will be accounted for as WIP until the sale of goods (services).


The volume of work in progress and its compositionvery different for enterprises in different industries. The duration of the production cycle and the amount of costs can vary widely depending on the nature of the products and the organization of the industrial process. Therefore, work in progress in the accounting of different enterprises can be taken into account in different ways.

work in progress in accounting

For companies with a long production cycle and for those who provide complex services (design, scientific, construction, etc.), sales can be recognized as follows:

  • upon completion of all works and signing of the necessary documents;
  • As each stage of work is completed.

In most cases, the first option is used.

Incomplete production in accountingis found both in the main and in auxiliary production, as well as in the work of servicing farms. Accordingly, the information collected on the following accounts of the same name is used:

  • account 20;
  • account 23;
  • account 29.

Balances on the debit of these accounts at the end of the month - this is the work in progress at the enterprise.

For the second case there is an account 46"Completed stages for unfinished work." The account is collected information on the completed stages of work, each of which has an independent value and is provided for by the concluded contract.

Possible accounting entries with the account:

Accounting entriesContents of the business transaction

Дт 46 - Кт 90/1

Recognition of revenue for the amount of the cost of one completed stage of work when paid by the customer

Дт 62 - Кт 46

Write-off of the full price paid by the customer for all work after completion of all stages

Incomplete production in the accounting of trading companies involves the balances of unrealized products and the costs incurred for it.

In the course of its work, the firm-selleris faced with a number of costs: the acquisition of goods, costs associated with the provision of trade services (rental space, advertising costs, staff salaries, transportation costs, etc.). In trade, these costs are called the costs of circulation. In the presence of unsold goods, companies can not fully write off the costs of circulation made during the reporting period. The amounts of such expenses should be distributed, while the share of the balance of unrealized goods remains in the account 44 "Sales costs".

Estimation of work in progress

In the Russian legislation, several options for estimating WIP are considered. All of them are registered in clause 64 of the FAS. So, consider them in order.

Calculation using the actual cost price

Extremely accurate method. In this case, all those costs that are associated with the output of the product are collected. Its essence lies in the fact that the number of units of the refinery, available at the end of the month, is multiplied by the calculated average cost of a refinery unit.

Calculation with application of normative (or planned) cost price

evaluation of work in progress

The use of this method suggests thateconomists of the enterprise calculate the accounting (planned) price for a unit of WIP. The plus method is that when using discount prices, the evaluation of work in progress as a process is substantially simplified. By a minus one can consider a more laborious process of calculating the cost of a product ready for production. Deviations between accounting prices and the actual cost of WIP must be accounted for under Account 20.

Calculation using direct cost items

Feature of the method is that in the cost pricework in progress is directed only to direct costs directly attributable to production. All other costs are transferred to the cost of finished products. The list of these expenses is determined by the accounting policy of the enterprise.

Calculation of the cost of used raw materials

This method is similar to the previous one, with the difference that the cost price includes only the cost of raw materials released to production (including semi-finished products).

However, these methods are not available to allorganizations. The choice of the valuation method usually depends on the type of production. The company, engaged in piece and unit production, is only available at actual cost. Organizations with mass and serial release of products have the opportunity to choose any of the four methods of accounting.

Cost of WIP

cost of work in process

Cost of work in progress -the amount of money expended for the creation of products (works, services), which is still under processing at the end of the reporting period.

Calculation of prime cost is absolutely necessaryprocess. Data on the cost of work in progress and ready-to-produce products will be required for the preparation of financial statements. Do not do without them and when forming a pricing and assortment policy of the enterprise.

To understand how interconnected the concept of costs in the work in process and the cost of finished products, it is worth considering the following formula:

  • GP = WIP (balance at the beginning of the period) + Costs - WIP (balance at the end of the period). Where:

    GP - the cost price of the output in the actual valuation;
    Costs - expenses for production for a month (debit turnover on account 20);
    WIP - balances, respectively, at the beginning or end of the month on account 20.

Calculation of cost of WIP

Economic elements

When managing costs, it is worth rememberingplanning and rationing of expenses. To do this, you will need to separate the costs by different components in order to analyze the structure and control the change in the value of each of them. In the domestic practice, classifications are applied according to various criteria. In one of them, there is a subdivision of costs for economic elements, and in the other - for costing items.

The composition of economic elements is set by PBU 10/99, it is the same for all commercial organizations:

  • cost of raw materials;
  • the amount of wages of workers;
  • deductions to social funds;
  • depreciation;
  • other expenses.

Calculation articles

Of course, usually the costs are incompleteproduction by this list are not limited. The list of calculation items is more extensive and is determined by the enterprise independently, depending on the nature of production. However, the legislation suggests a standard nomenclature, which includes the following items:

balance of work in process

  • own raw materials and materials;
  • purchased semi-finished products or products, services rendered from outside;
  • returnable waste (deductible line);
  • energy and fuel for technological purposes;
  • salary of production workers;
  • mandatory contributions and contributions to social funds;
  • costs associated with the preparation and production development;
  • general production expenses (maintenance of main and auxiliary productions);
  • general economic expenses (management costs);
  • loss from marriage;
  • other production costs;
  • sales costs (so-called commercial costs).

The first 11 lines form the production cost. In order to calculate the full cost price of the output, you will need to add up all 12 articles.

For effective cost management, it is useful to apply both described groupings.

Inventory of work in progress

No operational accounting can guaranteeabsolute accuracy of the received credentials. In order to clarify them, the organization carries out an inventory. The procedure for its implementation is determined by the Methodological Guidelines. Before the inventory, all materials, parts or semi-finished products are handed over to warehouses for which processing is completed at this stage. The rest of the raw materials, what is already at the jobs, but whose processing has not yet begun, is fixed separately. The same applies to the rejected parts, they can not be included in the remainder of the unfinished production.

inventory of work in process

According to the current guidelines, an inventory inmust be carried out before drawing up the annual balance sheet. In addition, depending on the specifics of production, enterprises spend it quarterly or monthly.

The appointed permanent commission,approved by the order of the head, makes an inventory by weighing, measuring and actually counting. For each separate structural subdivision, a separate inventory is drawn up, indicating the names of the stocks, their stages or degree of readiness, volume or quantity. In this way, the exact balances of the work in progress that is available at the enterprise are determined.

When the work in process inventorythe completed acts are transferred to the accounting department for processing. When identifying discrepancies from the credentials, the registration records are filled, and the surplus or deficiency is fixed by the relevant accounting entries. The commission needs to identify the perpetrators and the reasons for the deviations found in order to determine the procedure for writing off these amounts.

Accounting entriesContents of the business transaction

Дт 94 - Кт 20

Write-off of the amount found during the inventory of shortages within the limits of natural loss

Дт 94 - Кт 73/2

Дт 20 - Кт 94

Write-off of the amount of shortage that occurred due to staff fault

Дт 94 - Кт 91

Дт 20 - Кт 94

Writing off shortages in the event that the guilty parties are not found

Дт 20 - Кт 91

The actual balances of the work in process do not correspond to the accounting data. The surplus is identified and credited

Determining the volume of WIP

in-progress manufacturing standard

Reducing the amount of work in progressuseful in that it helps to accelerate its turnover, which, in turn, directly positively affects turnover and profit. This can be achieved by reducing the duration of one production cycle while optimizing production and labor in the enterprise. In this case, stocks in the work in process, their size and composition should be formed in such a way as to ensure the maximum continuity and rhythm of the industrial process. The definition of these quantities is called the normalization of work in progress.

The standard of work-in-progress is thatminimum amount of current assets, which can ensure continuous and uniform operation of the enterprise. This value should always be available to the company. For its calculation, the following formula exists:

  • WIP = Volume of cpu x Cycle length x Coefficient. where:

    Volume sr.sut - the cost of production per day (in monetary terms);
    The length of the cycle is the duration of one production cycle (measured in days);
    Coefficient of growth is the coefficient of increase in costs.

Thus, it is clear that the WIP standard is directly proportional to the volume of production of the enterprise, the duration of the industrial cycle and the degree of increase in costs.

Let's consider the contents of the formula in more detail

Average daily outputis determined by dividing the value of output for the year by the number of working days per year. It is obvious that the work schedule of the enterprise directly affects the final amount.

The length of the cycle means the time necessary for the raw materials (materials) to be converted into production to be converted into finished products.

The coefficient of increase indicates the degree of readiness of the products and is calculated by using the ratio of the average cost of WIP to the production cost of GP.

  • Coefficient. buildup = Cost of WIP average. : The cost price of GP production.

This is not all information that canIt is required to calculate the necessary stocks in the work in process. Experienced economists remember that understated volumes can cause the work to "stand up", there will be a shortage of resources, up to the inability of the enterprise to pay its obligations in time. And excess of stocks can lead to that means which could "turn around" and bring in the income, will come to a state of "freezing". Hence, there are losses, a decrease in profitability and an increase in the amount of payment of various taxes.

Unfinished production. An asset or a Passive?

The WCP meets all the necessary criteria tobe considered an asset - it is a resource (property) owned by the enterprise and capable in the future to bring material benefits. In turn, as far as we remember, the asset of the balance is divided into two important parts: long-term (non-current) and short-term (negotiable) funds.

Incomplete production is often oneof the main components of the company's current assets. At the same time, work in progress is not separately shown in the company's balance sheet. Data about it are contained in the section "Current Assets", the line "Inventories" (1210). This line contains the collective information about the following items:

  • inventories;
  • expenses of future periods (BPO);
  • shipped goods;
  • unfinished production;
  • finished products;
  • goods for resale;
  • other stocks and costs.

For enterprises with a long production cycle, it is possible to display WIP in the section "Non-current assets".

Incomplete production in the balance sheet can beand a separate line. This is the case if the cost of it is a significant amount. You will also need to provide more detailed information in the appendix to the balance sheet and form 2 "Statement of financial results."

WIP in the reporting of small businesses

Since 2013, some changes have been made,related to the provision of accounting reports. Also, new forms were developed. The basic principles in them remained unchanged, as before, the balance sheet is divided into two halves: the asset and the passive, the results of which must coincide. But for small businesses now offered a simplified form, in which there are no sections, and the number of indicators is less than in the old one. Such a company can independently decide for itself which version of the reporting to choose, having previously fixed its decision in the accounting policy.

In a new form, as in the previous one, the unfinishedproduction is an asset of balance, for it there is still a line "Stocks". Thus, both the name and the line code for small businesses have remained the same.

Instead of concluding

The subject is quite extensive and complex,especially if it is a large industrial enterprise. In our article we touched on many issues, but, of course, it was impossible to consider all the difficulties and nuances that arise in the work of the accountant when accounting for work in progress.

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