Partially completed goods that are in the production process but not yet finished and ready for sale.
Work-in-Progress represents inventory that has entered the manufacturing process but isn't complete. WIP includes raw materials being processed plus labor and overhead costs incurred so far. On the balance sheet, it appears under Current Assets → Inventory (between Raw Materials and Finished Goods). Accurate WIP valuation is critical for: correct COGS calculation, production efficiency analysis, and identifying bottlenecks. In service industries (IT, consulting), WIP represents billable hours worked but not yet invoiced. Under Ind AS 2, WIP is valued at cost (materials + conversion costs + allocable overheads).
Furniture manufacturer: 50 tables in production. Each table: Raw material used so far ₹3,000, Labor so far ₹1,500, Overhead allocated ₹500. WIP value per table: ₹5,000. Total WIP inventory: 50 × ₹5,000 = ₹2,50,000. These tables are 70% complete — once finished (₹7,000 total cost each), they move to Finished Goods inventory.
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Raw Materials: Inputs not yet entered production (unused steel, fabric, etc.). WIP: Materials currently being transformed (partially assembled products). Finished Goods: Completed products ready for sale. The flow is: Raw Materials → WIP (manufacturing process) → Finished Goods → COGS (when sold).
High WIP means: 1) Capital tied up in incomplete products (cash flow drag), 2) Potential quality issues if items sit unfinished too long, 3) Higher storage costs, 4) Risk of obsolescence, 5) Indicates production bottlenecks or poor scheduling. Lean manufacturing (JIT) aims to minimize WIP through continuous flow. Ideal WIP = minimum needed to keep production running smoothly.
The process of ordering, storing, tracking, and controlling goods to ensure the right quantity is available at the right time while minimizing holding costs.
The direct costs attributable to the production or purchase of goods sold by a company during a specific period.
A comprehensive list of raw materials, components, and sub-assemblies required to manufacture a finished product, along with quantities and specifications.
A ratio that measures how many times a company's inventory is sold and replaced over a specific period, indicating sales efficiency and inventory management.
The method used to assign a monetary value to unsold inventory at the end of an accounting period.
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