[snowie71]

Hi All,

I am firstly after some help on WIP Journals.

New construction company I am at has WIP posted to P&L (under opening and closing wip/stock) and Balance Sheet under Assets. Having not dealt with WIP before is this correct?
If not please advise as to a normal journal posting dbt/crdt for WIP (I have posted debit to WIP on Balance sheet just not sure of other side of journal).

Secondly I need to post straight line depreciation (various years of purchase, have already worked out the correct amounts) to vehicles depreciation nominal account and again I need to know the other side of the journal (have vehicles at cost nominal a/c but that figure should stay static unless adding new vehicles?).

Assistance much appreciated

[Criado]

For your first question,
Debit. WIP
Credit. Account Title you allocate to WIP

For your second question,
Debit. Depreciation Expense
Credit. Accumulated Depreciation

[morgaine300]

If you are expected to make these kind of entries and you don't know how, I would suggest getting yourself a book on managerial (cost) accounting and looking through the first 2-3 chapters. (You need to get as far as job costing. You don't need process costing for construction.) There are new entries, new accounts and new things to understand that add extra complications to the normal entries.

WIP is an inventory account, an asset. It should not be on the P&L at all. It's Work in Process, meaning something that is in the middle of being made. All costs -- direct and indirect -- must go into it. If there is something that would be expensed, then it isn't WIP. There are three things that go into WIP: direct materials, direct labor and overhead costs. (i.e. your credit can be any of those 3). Overhead costs need to be applied at the end of the period. Anything related to the construction that isn't direct material or direct labor is overhead. Anything related to administrative sorts of things is not. I can't give you a lot of detail about construction in particular because I'm not a cost accountant and have never applied this in real life to construction. (You need to know certain details about the business and how it operates to answer certain details. And cost accounting is not as cut and dry as financial accounting and opinion gets involved a lot too.)