UK Work in progress and accrued income

[Riskreep]

Could somebody kindly verify my perception of WIP – work in progress – for a construction company.


In essence it will be made up of all direct costs – materials and labour – associated with all currently incomplete work? The main purpose being to remove these costs from COS and thus the profit and loss for the period, and transfer to balance sheet WIP account, because the work has not been completed or billed in that period so should not be reflected in the income and expenses?


WIP in relation to accrued income – would come after WIP, and would be once work is completed and has been invoiced but not yet received payment for?

 

[Fidget]

Could somebody kindly verify my perception of WIP – work in progress – for a construction company.


In essence it will be made up of all direct costs – materials and labour – associated with all currently incomplete work? The main purpose being to remove these costs from COS and thus the profit and loss for the period, and transfer to balance sheet WIP account, because the work has not been completed or billed in that period so should not be reflected in the income and expenses?

yes, pretty much. Only the income/expenses in relation to a stage deemed to have been completed in on-going construction is taken to the P&L, the rest sits on the balance sheet until released to the P&L as later stages are completed.

WIP in relation to accrued income – would come after WIP, and would be once work is completed and has been invoiced but not yet received payment for?

Accrued income generally applies where income is due but hasn't yet been invoiced, along with other things that don't need an invoice such as interest receivable. So, if you've raised an invoice, then you've made the necessary accrual by virtue of doing that, so it wouldn't be in the accrued income line because you've already invoiced it.