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Consumption Entries

Feb 19 at 11:53 AM

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Former Member

The question is regarding, consumption entries. We see that when goods are issued to production Raw material account (BalanceSheet Account) is credited and WIP (Balancesheet Account) is debited. However, I feel that, when goods are issued to production Raw material account(BalanceSheet Account) should be credit and raw material consumption account( P&L Account ) should be debited. Please Advise

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2 Answers

John Nelson Paul
Feb 20 at 03:35 AM
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Dear Gaurav,

You have a clarification on the goods issued to production Raw material account (Balance Sheet Account) is credited and WIP (Balance sheet Account) is debited.

1. This is correct and the journal entries are
For Goods issue to Production.
Debit Work in Process account
Credit Raw Materials account

For Goods issue from Production.
Debit Inventory a/c.
Credit Work in Process a/c.


2. The Material that has entered the production process but is not yet a finished product.
Work in progress (WIP) therefore refers to all materials and partly finished products that are at various stages of the production process.
WIP excludes inventory of raw materials at the start of the production cycle and finished products inventory at the end of the production cycle. Also referred to as "work in process."

3. For accounting purposes, work in progress is considered as a current asset on the balance sheet. Work in progress is generally valued higher than raw materials, but significantly lower than finished products.

4. Work in process (WIP) clearing run is a periodic task that is usually performed at regularly scheduled times or during period closing to correct and clear the work-in-process account. It selects all production lots that have the corresponding status and reduces the associated work-in-process inventory to zero.
By taking into account all changes to work in process during the period, WIP clearing ensures that the value of the work in process is correctly reported at the end of the period.

Please refer to the help center document ' Work in Process' and 'Work-in-Process Clearing Runs' for further clarifications


Regards
John Nelson Paul

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Yuran Chen
Feb 20 at 05:18 AM
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Dear Gaurav Dubey,

You may refer to help document <Work-in-Process Clearing Runs>.

To find it, you can search with 'WIP' in help center. Open the document <Work-in-Process Clearing Runs> and then you can see Example: WIP Clearing with Standard Cost Method.

Postings:Material withdrawal from inventory (a pure accounting exchange on the assets side that does not affect the income statement):

Debit Work in Process , Credit Inventory

Best Regards

Yuran

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