Accounting for Work In Progress – Definition, Journal Entry, and Accounting Treatment


Work in progress includes goods that are partially completed, and are still in the production process. These are items that are mainly undergoing a certain process in the production cycle and are likely to be in-between places or different workstations.

The items that are currently Work in Progress do not include raw materials or finished goods. Work in Progress items, however, do not include raw materials or finished goods.

Work in Progress comprises of the full amount of raw materials that are required for a certain product because material listing and costing is carried out at the beginning of the production process.

Therefore, the total amount of work in progress, is, therefore, calculated as a mixture of the processes and raw materials that are already utilized, in addition to the materials and processes that are likely to be included.

In other words, additional processing costs are included in the year-end amount for work in the process too. Work in Process is one of the three types of inventory, with others being Raw Material Inventory and Finished Goods Inventory.

Journal Entry and Accounting Treatment

The Journal Entry to record Work In Progress Inventory is as follows. This is for the time when raw materials are taken into the production process, and they are being processed to be converted to finished goods.  

Inventory Bookkeeping
  Debit Credit
Raw Materials Inventory $50.00  
Accounts Payable   $50.00
  Debit Credit
Work in Progress Inventory $50.00  
Raw Material Inventory   $50.00
  Debit Credit
Finished Goods Inventory $50.00  
Work in Process Inventory   $50.00

The Journal entries mentioned above show that when Raw Materials are purchased on credit, the Raw Material Inventory Account is debited, and Accounts Payable is credited.

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Subsequently, once the Raw Materials are sent for processing, Work In progress Inventory is debited for the amount, and Raw Material inventory is credited. Finally, upon completion, the Finished Goods Inventory is debited, and the Work in Progress Inventory is debited.

The accounting treatment and accounting nature of this account are similar to that of an asset account. This is primarily because of the fact that it Works in Process Inventory is currently in the finishing stage, and therefore, it is meant to possibly generate revenues and profits for the company in the upcoming months.

Also, it is a temporary account, and not all companies have a compulsion to maintain this account. This is because certain products do not need to have a longer work in progress process.

Therefore, if the production process is slow, or the company is not a manufacturing concern, there is no need to have a work in progress account.


To conclude, it can be seen that a work-in-progress is the cost of unfinished goods in the manufacturing process.

This amount includes labor, raw materials, and overheads. Work in Progress is considered as a Current Asset on the Balance Sheet, predominantly because of the fact that they are expected to be converted to Finished Goods, and subsequently, be sold as soon as they are prepared and finalized.

Similarly, minimizing the Work in Progress Inventory is termed as a good practice, because the percentage of completion is a different task to determine at the end of a subsequent financial year.