Work In Progress - WIP


DEFINITION of 'Work In Progress - WIP'

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."


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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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  1. Does working capital include inventory?

    A company's working capital includes inventory, and increases in inventory make working capital increase. Working capital ... Read Full Answer >>
  2. How is work in progress (WIP) typically measured in accounting?

    Work in progress, also known as work in process, is usually measured and categorized as a current asset or a long-term asset ... Read Full Answer >>
  3. How can I calculate funds from operation in Excel?

    In general, the terms "work in progress" and "work in process" are used interchangeably to refer to products midway through ... Read Full Answer >>
  4. What is the difference between work in progress (WIP) and raw materials in accounting?

    Raw materials and works in progress (WIP) are distinct categories in financial accounting for business inventory. Each applies ... Read Full Answer >>
  5. Can a company's working capital turnover ratio be negative?

    A company's working capital turnover ratio can be negative when a company's current liabilities exceed its current assets. ... Read Full Answer >>
  6. Does working capital measure liquidity?

    Working capital is a commonly used metric, not only for a company’s liquidity but also for its operational efficiency and ... Read Full Answer >>

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