---
title: "Work in progress (WIP)"
description: "What work in progress inventory is, how WIP is valued and moved to finished goods, the formula for ending WIP, and an example with a simple production order."
canonical: https://ledgeriano.com/glossary/work-in-progress
language: en
publisher: "Ledgeriano"
updated: 2026-11-06
---

# Work in progress (WIP)

> What work in progress inventory is, how WIP is valued and moved to finished goods, the formula for ending WIP, and an example with a simple production order.

Work in progress, or WIP, is the cost of products that have started production but are not yet finished at the reporting date. It includes the direct materials issued, the direct labour spent and the production overhead absorbed so far, and it is reported as part of inventories on the balance sheet until the goods are completed.

WIP is a staging account. Materials issued to production, labour booked to an order and overhead absorbed at the predetermined rate are debited to it. When units are finished, their cost moves out of WIP into finished goods, and later into cost of sales when they are sold.

At period end, whatever is still in WIP must be measured. In job order costing each open order carries its own accumulated cost; in process costing the cost is split between finished units and partly finished units using [equivalent units](https://ledgeriano.com/glossary/equivalent-units).

A large or growing WIP balance can signal stuck orders, unrecorded completions or overhead absorbed on orders that never close. In [Ledgeriano](https://ledgeriano.com/guides/inventory-cost-accounting) production orders collect material issues, labour and overhead, post receipts of finished goods, and close with variances so WIP clears properly.

```
Ending WIP = Opening WIP + Materials + Labour + Overhead absorbed - Cost of goods completed
```

## Example: one production order

An order for 50 tables receives materials of 6,000, labour of 2,500 and overhead absorbed of 1,500. At month end 30 tables are finished at a standard cost of 190 each (5,700).

WIP is 6,000 + 2,500 + 1,500 - 5,700 = 4,300, which stays on the balance sheet until the remaining 20 tables are finished or the order is closed.

### Is WIP a current asset?

Yes. WIP is part of inventories and is presented within current assets, alongside raw materials and finished goods.

### Do service companies have WIP?

Many do: consulting firms, agencies and builders accumulate unbilled time and costs on projects. Under IFRS 15 these may be contract assets or costs to fulfil a contract rather than inventory.

Guide: https://ledgeriano.com/guides/inventory-cost-accounting