How to calculate work in progress
Video: Work in Process (WIP) Inventory 2024, May
The cost of work in progress is calculated at the end of the month when costing and closing the accounting period. The actual cost of work in progress is calculated using various methods, depending on the characteristics of the production. We will calculate the actual cost of work in progress by distributing direct costs between execution and work in progress in proportion to the contract value of the orders.
You will need
- Accounting Data:
- - about the natural volume of work in progress;
- - About the actual direct costs of the enterprise for the month (account 20 "Main production").
- Contract for the performance of work concluded with the customer.
Instruction manual
1
Determine the natural volume of work in progress (outstanding orders) according to inventory at the end of the month. Inventory data is reflected monthly in the inventory records, or in other documents recording the fulfillment of production orders. Determine the contractual (estimated) cost of outstanding orders (under contracts for the execution of work concluded with the customer) at the beginning and at the end of the month, calculate the contractual (estimated) cost of orders completed within a month.
2
Determine the proportion of work in progress in the total number of orders at the end of the month. Calculate it as follows: to the contractual (estimated) cost of unfinished orders at the beginning of the month, add the contractual (estimated) cost of orders completed during the month. Divide the contractual (estimated) cost of outstanding orders at the end of the month by the received number.
3
Calculate the actual cost of work in progress. To do this, distribute the amount of direct costs between completed orders and work in progress as follows.
Take the remainder of the actual amount of direct costs at the beginning of the month, add the total amount of actual direct costs according to the accounting data (turnover on the debit of account 20 "Main production"). By multiplying the total direct costs for the month and their balance, the beginning of the month by the share of work in progress at the end of the month, you will receive the actual cost of work in progress at the end of the month.
4
Indicate in the accounting policy the procedure for the allocation of direct costs of implementation and "incompletion". In accordance with the Methodological Guidelines of the Ministry of Taxes and Taxes of Russia on income tax, you can choose the economically feasible indicator by which the direct costs are allocated: the cost of orders (contractual, estimated, cost by the sum of direct costs in a specific order) or in-kind indicators, if these indicators are different orders will be comparable (kilometers, etc.).
note
The valuation of work in progress is documented in the Statement of valuation of work in progress. This document is compiled as a whole for the organization, locations and types of products. The data reflected in this document serve as the basis for the distribution of costs between finished products and "work in progress" on the one hand, and between individual types of products on the other.
Forms of statements are developed by the organization independently, depending on the characteristics of production.
