DEFINITION of Goods-In-Process
Goods-in-process is part of an inventory account on the balance sheet of a manufacturing company. Goods-in-process relates to partially completed goods that are somewhere in the manufacturing process and not yet ready for sale. Also known as "work-in-process" or "work-in-progress."
BREAKING DOWN Goods-In-Process
Goods-in-process is one of three manufacturing inventory classifications, an intermediate state between raw materials and finished goods. A manufacturing company takes its raw materials and moves them into production or assembly mode. The numerical accounting for goods-in-process at the end of any period is the beginning balance of good-in-process plus the value of raw materials transferred into the account minus the ending balance of goods-in-process.
Included in the goods-in-process account are costs of direct labor and material as well as an allocation of manufacturing overhead. Once production of these goods is completed, they are moved to the finished inventory account. Inventory, a current asset on the company's balance sheet, is the total of the three states of production. Typically, the goods-in-process sub-account carries the smallest amount among the three if the company engages in high production volumes of whatever it makes.
Example of Goods-In-Process
Deere & Company, the farm equipment manufacturer, recorded an inventory value of $3.9 billion on its balance sheet for its fiscal year 2017. In the note to its financial statements, the number was broken down into $1.7 billion in raw materials and supplies, $0.5 billion in goods-in-process ("work-in-process" as labeled by the company), and $3.2 billion in finished goods and parts. After a $1.5 billion adjustment to LIFO value, the inventory account totaled $3.9 billion. Note that the goods-in-process sub-account is a minor fraction of the total.