A work in process controlling account, also known as a work in progress controlling account or WIP controlling account, is an accounting ledger account that serves as a temporary holding account for the costs incurred in the production process of goods or services that are in progress but not yet completed. It is a part of the work in process (WIP) inventory account and is used in job order costing or process costing systems.
Here are some key points about the work in process controlling account:
- Cost Accumulation: The work in process controlling account is used to accumulate the direct materials, direct labor, and factory overhead costs associated with the production of goods or services that are in the intermediate stages of completion. These costs are recorded in the account as they are incurred throughout the production process.
- Job Order Costing: In job order costing systems, the work in process controlling account is associated with specific jobs or projects. It keeps track of the costs incurred for each job as materials are consumed, labor is utilized, and overhead is allocated. The costs recorded in the account are later used to determine the cost of goods manufactured for each job.
- Process Costing: In process costing systems, the work in process controlling account is associated with a particular production department or process. It accumulates the costs incurred in each department as the goods move through various stages of production. The costs in the account are later used to calculate the cost per unit produced in each department.
- Valuation: The balance in the work in process controlling account represents the accumulated costs of partially completed goods or services. This balance is considered an asset on the company’s balance sheet and is included in the overall WIP inventory. The balance is continuously adjusted as new costs are incurred or completed units are transferred out.
- Cost Transfers: When the goods or services in progress are completed, the costs from the work in process controlling account are transferred to the finished goods inventory account or the cost of goods sold account, depending on the stage of completion and the accounting method used.
The work in process controlling account provides a means to track and control the costs associated with the production process. It allows managers to monitor the costs incurred for each job or department, assess the progress of production, and determine the cost of goods manufactured or cost per unit produced. It also helps in evaluating the efficiency and profitability of the production process.
Note: The specific terminology and use of work in process controlling accounts may vary depending on the organization’s accounting system and industry practices.