WIP Settlement

[Former Member]

Hi,

I have a query regarding WIP Settlement accounting entries. During period end when we settle a WIP, the accounting entry is WIP (Balance Sheet) Dr to WIP (P&L) Cr.

Now when we close the period after seettlement, are the entries reversed ?

Please help me with this understanding.

Thanks in Advance,

Safi

[Former Member · Accepted solution]

Hi

As at the time of WIP calculation the entry you mentioned is right as WIP Balance sheet to WIP P & L once the production is completed and inventory credit and when you run the month end process in next time the entry will reversed.

E.g.

Production order of A material include B & C material

if B only consume in the order then

Entry 1 Consumption of B Dr

To Inventory of B

WIP

Entry 2 WIP Balance Sheet account dr

To WIP Profit and loss account Cr

Next month materil c consume and material A is ready

Entry 3 Consumption of C Dr

To Inventory of C

Entry 4 Inventory of A Dr

Cost of Production

Month end

1. Overhead

2. WIP

WIP Profit and Loss account Dr.

WIP Balance Sheet Account Cr.

If the answer is helpful kindly assign points

Thanks & Regards

Mahesh

[Former Member · Accepted solution]

Thanks Mahesh.