Work In Progress - WIP

AAA

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."

 

VIDEO

Loading the player...

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.

RELATED TERMS
  1. Balance Sheet

    A financial statement that summarizes a company's assets, liabilities ...
  2. Working Capital

    This ratio indicates whether a company has enough short term ...
  3. Obsolescence Risk

    The risk that a process, product or technology used or produced ...
  4. Raw Materials

    A material or substance used in the primary production or manufacturing ...
  5. Inventory

    The raw materials, work-in-process goods and completely finished ...
  6. Asset

    1. A resource with economic value that an individual, corporation ...
Related Articles
  1. Fundamental Analysis

    Work In Progress (WIP)

    Work in progress, also know as WIP, is an asset on the company balance sheet. WIP is the accumulated costs of unfinished goods that are currently in the manufacturing process.
  2. Insurance

    Working Capital Works

    A company's efficiency, financial strength and cash-flow health show in its management of working capital.
  3. Investing Basics

    Reading The Balance Sheet

    Learn about the components of the statement of financial position and how they relate to each other.
  4. Investing Basics

    The Working Capital Position

    Learn how to correctly analyze a company's liquidity and beat the average investor.
  5. Fundamental Analysis

    Inventory Valuation For Investors: FIFO And LIFO

    We go over these methods of calculating this component of the balance sheet, and how the choice affects the bottom line.
  6. Investing Basics

    Understanding The Cash Conversion Cycle

    Find out how a simple calculation can help you uncover the most efficient companies.
  7. Markets

    Introduction To Fundamental Analysis

    Learn this easy-to-understand technique of analyzing a company's financial statements and reports.
  8. Options & Futures

    Advanced Financial Statement Analysis

    Learn what it means to do your homework on a company's performance and reporting practices before investing.
  9. Investing Basics

    What's Current Portion of Long-Term Debt?

    The current portion of long-term debt is the part of a company’s long-term debt that must be repaid within the next year.
  10. Economics

    Explaining Cost Control

    For a business, cost control entails managing and reducing expenses.
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. How do dividends affect the balance sheet?

    Dividends paid in cash affect a company's balance sheet by decreasing the company's cash account on the asset side and decreasing ... Read Full Answer >>
  5. Who actually declares a dividend?

    It is a company's board of directors who actually declares a dividend. The declaration date is the first of four important ... Read Full Answer >>
  6. Are dividends considered an expense?

    Cash or stock dividends distributed to shareholders are not considered an expense on a company's income statement. Stock ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Recession

    A significant decline in activity across the economy, lasting longer than a few months. It is visible in industrial production, ...
  2. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  3. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  4. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  5. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  6. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!