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WIP Ledgers closing

SRINIVAS (Accoutant) (33 Points)

30 September 2020

we started new company till now accounted in WIP Ledgers
now we have to close those entries

how to pass closing entries of WIP can one one give suggestion.

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8 Replies

Srishti Agrawal (Practice, Teacher) (172 Points)
Replied 30 September 2020

Transfer what is completed to finished goods, whatever remains you have to debit WIP closing stock a/c and transfer the balance there from this ledger. Hope this helps.

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 30 September 2020

Another way to easily identify where to close ledger balances is to identify items presentation. For example:

Capital ledger= carry the difference to credit side. (B/d)

Sales ledger= carry the difference in ledgers in the credit side (b/d)

Asset ledger= carry the differences in ledgers on the debit side (b/d)

Payables ledger= carry the differences in ledger on the credit side. (B/d)

@ Ms Shreshti Agarwal explained about transferring balances, and the above method is easy to understand

why? Because in the financial statements:

Asset is debited

Liabilities are credited

Sales is credited

Expenses are debited in the financial statements. So b/d balances are always on the debit or credit side of ledgers depending upon where they are recognised in the financial statements.

This is like thumb rule and very few people know this secret.

sabyasachi mukherjee (26055 Points)
Replied 01 October 2020

Srinivas
ITS NOT LIKE THAT IF U HAVE preoperative expenses you need to capitalize it .
Close your books of accounts and then start
afresh.

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 01 October 2020

The below table is for calculating COGM which is not so necessary here. I am aware AS 2 includes WIP in disclosures only and IndAS 2 uses WIP for calculating NRV and cost measurement of ending inventory. So check your WIP status is valid or not as well comparing it with inventory valuations used as per standard

Beginning Balance 10,000

Direct Materials 100,000

Direct Labor 50,000

Manufacturing Overhead 60,000

190,000* COGM

Ending Balance 30,000

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 01 October 2020

Beginning WIP + Manufacturing costs - Cost of goods manufactured

= Ending work in process

Debit Credit

O/B WIP COGS

ADD materials, labor, overhead

ENDING BALANCE

B/D Ending WIP

like I have mentioned in the first answer, debit the closing balance. There is no GAAP or accounting standard for this WIP treatment. And, IndAS 2 will include WIP into cost & NRV calculations and disclosed the carrying WIP amount. While, AS 2 discloses WIP only.

WIP a/c - balance sheet

To COS ending inventory a/c

because ending inventory comprises of

raw material

WIP

Finished goods.

Closing the ledger? Once final balance is b/d it is closed.

yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 01 October 2020

@ Stinivas

Apart from bin card or stores ledger, no other ledger is available on the net. Can you post a format?

sabyasachi mukherjee (26055 Points)
Replied 01 October 2020

@ gomes
this is seperate

closing entries of wip no standard virtually for wip.
only the indas 2 will include wip into cost.
opening wip
add manufacturing cost which included factory overhead..
It is basically part of cost sheet in prime cost calculation.

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yasaswi gomes (My grammar is 💯 good I) (7290 Points)
Replied 01 October 2020

That’s reasonable and I suspect there is no ledger for this. When c/d balance is the COGM amount technically from above formats. This makes it just a process formula which is not presentable in ledgers maybe.