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This question is about employer.
What is a WIP in accounting?
A WIP in accounting is a Work-in-Progress (WIP), which refers to goods or products that are yet to be finished and still being produced. A WIP in accounting is recorded as a current asset or, in some cases, a long-term asset on an organization's balance sheet. This depends on how the asset will ultimately be used.
WIPs often refer to the inventory of products still in the manufacturing process on the factory or facility floor. Works in progress (WIPs) have more value than raw materials for a company. This is because raw materials have yet to be put into the manufacturing process, while WIPs are at any given stage.
Most WIPs are inventory at the middle stage of the manufacturing process, meaning between raw materials and a finished product. For accounting purposes, WIPs are recorded on balance sheets and tracked on an organization's general ledger or an inventory account.
All of the costs associated with WIPs are taken into account by companies. These include:
Raw materials
Direct labor costs
Manufacturing or factory overhead costs
An accountant working with WIPs would record all raw materials associated with WIPs, tally all labor costs related to work in progress, compile all overhead costs associated with the WIPs, and then record the asset entry as a sum of all of these costs.
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