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Wip kese open kerte hai

SANTOSH MEENA (10 Points)

24 March 2023

about wip like kese open kerte hai

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CA Rakesh Ishi (Working at Private Company) (8637 Points)
Replied 24 March 2023

In manufacturing, WIP refers to the goods that are being produced but have not yet been completed. For example, if a company is manufacturing a car, the car that is partially assembled on the assembly line would be considered as WIP until it is fully assembled and ready for sale.

The following are the steps involved in accounting for WIP:

Determine the cost of materials: The cost of materials used in the production of WIP should be tracked and recorded separately in the accounting records.
Calculate the cost of direct labour: The cost of direct labour involved in producing the WIP should be calculated and recorded. This includes the cost of wages, salaries, benefits, and payroll taxes associated with the labour used in the production process.
Allocate overhead costs: Overhead costs such as rent, utilities, and depreciation should be allocated to WIP based on a predetermined overhead rate.
Determine the total cost of WIP: The total cost of WIP is the sum of the cost of materials, direct labour, and allocated overhead costs.
Record the WIP as an asset: WIP is recorded as an asset on the balance sheet until it is completed and sold. The value of WIP is adjusted periodically to reflect the progress of the production process.