Work In Progress - WIP

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What is 'Work In Progress - WIP'

Work in progress (WIP) refers to material that has entered the production process but is not yet a finished product. Work in progress (WIP) therefore refers to all materials and partly finished products that are at various stages of the production process. WIP excludes inventory of raw materials at the start of the production cycle and finished products inventory at the end of the production cycle.

Also referred to as "work in process."

BREAKING DOWN 'Work In Progress - WIP'

For accounting purposes, work in progress is considered as a current asset on the balance sheet. WIP is generally valued higher than raw materials, but significantly lower than finished products.

Most companies strive to keep the actual amount of work in progress as low as possible, so as to reduce the amount of capital tied up in the production or manufacturing process. Another reason to keep WIP low is to reduce the risk of obsolescence, especially in fast-moving sectors such as technology and consumer electronics.

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RELATED FAQS
  1. What is the difference between work in progress (WIP) and finished goods in accounting?

    Learn about the key features and differences between work in progress (WIP) and finished goods in terms of financial accounting ... Read Answer >>
  2. What is the difference between work in progress (WIP) and raw materials in accounting?

    Learn about the difference in inventory financial accounting between works in progress and raw materials, as reported in ... Read Answer >>
  3. Why is work in progress (WIP) considered a current asset in accounting?

    Find out why accountants consider work in progress (WIP) to be a current asset on the balance sheet for financial accounting ... Read Answer >>
  4. How is work in progress (WIP) typically measured in accounting?

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