WIP Accounts
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Hi,<BR><BR>Could someone help me out on this topic.<BR>I have a question that shows a WIP account at the period end position and it asks to define the relevance of the credit entries to the account and state what happens to them in the next accounting period.<BR>The credit entries are as follows:<BR><BR>To finished Goods £116,000<BR>Balance C/D £57,000<BR><BR>Any Help will be appreciated<BR>
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WIP Accounts
Hi Soph.<BR><BR>Try thinking of WIP accounts in terms of trading accounts. It's not quite the same, but the basic structure is common.<BR><BR>The £116,000 going to finished goods becomes your closing stock in the company accounts. It's in stores, ready for selling. So, Dr Finished Goods (Stock); Cr WIP.<BR><BR>The £57,000 is not finished goods. It is still sitting on the shop floor. It is the closing stock for that process. It becomes the opening stock for that process for the next period. As with a Trading Account, the end of period accounting process is Dr Trading (WIP Stock); Cr WIP (to remove it). At the start of the next period, you reverse the transaction to put the WIP stock back there.<BR><BR>It's a bit long-winded, but it's only a paper transaction for accounting purposes.<BR><BR>(If I've understood it correctly!!!)<BR><BR>Mike0 -
WIP Accounts
Thankyou very much for this, I have been studying all weekend as I have my financial accounting simulation Tomorrow and this just wouldnt go in!<BR>Have you done your one yet?<BR>0 -
WIP Accounts
No, I haven't done it yet. We do ours after the exam.<BR><BR>I found that I can't grasp things unless I can relate them to something I've learned before. That's why the trading account image is so useful, here. It's not an exact match, but close enough!<BR><BR>All the best with the sim.<BR><BR>Mike0