Work In Progress Calculation

Haggis

Would really appreciate anyones help with understanding how to calculate my clients WIP figure for the balance sheet. His is a kitchen fitter so I guess WIP is a figure for a part finished job at the end of the year ? Would his previous accountant have calculated a percentage of an invoice that he raised at the end of the year where he had not finished the job ? I guess the sales income would then be adjusted accordingly ?
(the amount on the b sheet for previous year is £1,485)

Any ideas would be gratefully received ! many thanks

K H

It should really represent costs on the job to to the date of the year end plus a proportion of the profit he expects to make on the whole job apportioned on a pro rata basis, less anything that may have been invoiced on account.

i don't think i would adjust the turnover figures but would adjust the cost of sales as HMRC vat inspections like to compare sales turnover in the accounts with the sales turnover on the vat returns and this may lead to questions being asked. After all it gives the same profit figure.

Haggis

Thanks for your help KH, I assume you mean add an amount into the COS figure ? Sorry but I seem to have a real "block" on this and cannot get my head around it !
Thanks again

K H

i mean that you should treat the closing wip as you would closing stock and deduct from cost of sales.

this will give you the same gp as if you added it to the sales.

Haggis

I understand now, thanks for explaining it, much appreciated.