My question is how do you treat work in progress for a construction company in Tally.Please let me know what is the accounting entry and also under which accounting head the appropriate ledger a/c should be created.
23 March 2011
Thanks for the reply.i did not understand your reply.i am talking about w.i.p for project acounting ie, if we are having a project which is not finished in the current year and will be carried in the next year, in such a case what will be the entry to be passed in the end of financial year and the beginning of next financial year. please also let me know the equation of W.I.P and also under which group the closing w.i.p(P&l)Opening w.i.p(p&l),closing w.i.p(B/S) & opening w.i.p(B/S )ledger accounts should be created
03 August 2025
Hi! Here's a clear explanation on how to handle Work in Progress (WIP) for a construction company in accounting and Tally:
1. What is Work in Progress (WIP)? WIP represents the value of work done on a project but not yet completed or billed at the end of the accounting period.
It’s a current asset on the Balance Sheet because it reflects the value of work done which will realize revenue later.
2. Accounting Treatment of WIP At the end of the financial year:
You capitalize the cost incurred on incomplete projects as WIP.
This means you transfer the cost of work done but not billed from the Profit & Loss (P&L) statement to the Balance Sheet as an asset.
3. Ledger Accounts to be Created You should create the following ledger accounts:
Ledger Name Group Purpose Work-in-Progress (WIP) Current Assets To show closing WIP on Balance Sheet WIP Adjustment (P&L) Indirect Expenses To adjust WIP value in P&L account
4. Typical Accounting Entries At Year End (to transfer WIP from P&L to Balance Sheet): scss Copy Edit Dr. Work-in-Progress (Balance Sheet - Current Asset) XXX Cr. WIP Adjustment (Profit & Loss Account) XXX This entry removes the cost from the P&L and records it as an asset.
At the Beginning of New Financial Year (to reverse previous year’s WIP): scss Copy Edit Dr. WIP Adjustment (Profit & Loss Account) XXX Cr. Work-in-Progress (Balance Sheet - Current Asset) XXX This entry reverses the opening WIP to include it in the P&L for the new year.
5. Formula / Equation for WIP In project accounting:
\text{Closing WIP} = \text{Opening WIP} + \text{Cost incurred during the period} - \text{Cost transferred to P&L (completed work)} 6. How to enter in Tally Create a Current Assets ledger named "Work-in-Progress."
Create an Indirect Expenses ledger named "WIP Adjustment."
Pass journal entries as above on the cut-off dates.
Avoid using stock vouchers for WIP since it’s not inventory but a work asset.
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