Work In Progress - HELP!!!!!

[CatherineJ]

Can someone help me understand WIP.

I am re-reading last yr's accounts and I have noticed we have a positive WIP figure of £15,000

This sounds correct as we built a project that was effectively completed in June (Yr End) but we didn't get fully paid up until November.

I have no problem with the above but I do have an issue with our 2nd yr figures which show the following.

Opening WIP figure of -£30,000.

My understanding here is that all of a sudden we have acquired money for work not completed?


Does the above sound wrong, or am I missing something.

[Eric Mc]

Last year's Closing WIP figure should be the same as this year's Opening WIP figure - end of story.

WIP is not related to work paid for. It is related to UNINVOICED work and should be valued closer to the cost element of the unbilled work rather than the eventual sale value of that work.

Was last year's closing WIP properly reversed back into this year's Profit and Loss account at the commencement of this year's figures?

[plasticpig]

Are you a services company? If so a negative work in progress figure can occur if you have recieved an advanced payment on a contract (contract award fee).

[Eric Mc]

Would not the advance fee be posted directly to the balance sheet as "Accrued Income", thereby having no effect on the Profit and Loss account and consequently requiring no adjustment for WIP in respect of that project - apart from what was being provided normally.

[Smartie]

was there any stock too? A balance sheet often has a figure of "stock & WIP" and combines the two!