Definition of Work In Process



Work in process is a phase of production where the product is in the process of conversion from raw material to finished goods. The inventory figure that appears on the balance sheet includes all three forms of inventories, i.e. raw material; work in process, and finished goods inventories.

 


From an auditing perspective, the auditors have to perform physical inventory counts to make sure the inventories are not overstated. To verify the exact amount of work in process inventories they have to check the production reports that track the level of inventories that are under process. Normally companies try to overstate their inventories including work in the process to improve the current ratio of the company but the auditors have to make sure that the figures are accurate.


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