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Work in Progress (WIP) is a balance sheet account where expenses accumulate until they are recognized, typically used in production or long-term contracts. This approach prevents immediate expense recognition from distorting misrepresenting profit and loss statements. This ensures precise tracking and alignment of expenses and revenue.
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Create an Invoice: Record the expense and ensure that the General Ledger (GL) account associated with this service item is designated as a Work in Progress. When you select the Work in Progress (WIP) General Ledger (GL) account, the Cost Object field will become available. This field will display a new master data list where all levels set in the settings will be shown.
For example, if you include a projectProject as the cost object, in the description field, you can either keep the default description or modify it as needed.
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This can be applied to various documents as outlined below:
The Cost Object, used as a dimension, is included in all documents that track Work in Progress (WIP). These documents include:
- Invoices
- Employee and expense reports
- Inventory and production records
- Payroll and benefits calculations
- Fixed asset transactions
- Custom and other expenses
At month-end closing, the process will depend on the cost object settings. You can review how costs are allocated during month-end closing by going to Cost Allocation Settings under accounting.
Select the WIP GL account and configure the cost allocation settings by based on different cost objectobjects. Check the box for "By cost object" and add the relevant cost objects. You can choose options like closing directly to profit and loss, allocating costs, or not allocating at all.
If you choose to allocate costs, you can adjust the method and consider the cost object.
Different results will appear based on the allocation settings.
Thanks for being a Firstbit customer! #2.1.1.26 #Cost object #work in progress