What is the difference between work in process vs. work in progress?
On Behalf of McNabb, Bragorgos, Burgess & Sorin, PLLC | Jan 3, 2023 | Construction Law
Matters of law in the construction field can be complicated. Some legal terms may be difficult to understand, such as the difference between work in process and work in progress. It can help to talk to a lawyer who specializes in construction law in the Memphis, Tennessee area.
What is work in process?
A work in process means that you have products that move from raw materials to a finished product within a short period of time. They may be called goods-in-process and include manufactured goods that the production team completes in less than a full accounting cycle.
Work in process is measured in an inventory that will be on the company’s balance sheet. Some things it includes are materials and direct labor. Sometimes, the company will assess how much the incomplete goods are worth, as well as estimate the percentage of completion of these goods.
What is a work in progress?
A work in progress is how you refer to assets that will take a great deal of time to finish. This is typically used to describe work that is part of a larger project framework and means a larger time investment. They likely will consider a large build to be an example of a work in progress.
The work in progress also is reported on the balance sheet. The manufacturing company might use the fair market value assessment in its annual financial reporting requirements. Work in progress often spans many accounting periods and it has more technical and complex requirements.
The use of phrases
You’ll find that work in process is used more often in the manufacturing industry, while work in progress is used more in construction.
When a construction team is working on a larger project, they’ll report on the items during construction and label it as a work in progress. It is considered to be a capital asset and it tends to begin depreciating after completion.
When it comes to accounting and annual reporting for your business, you want to ensure that you use the right language. You must keep track of the manufacturing of items as well as larger construction project tasks in the proper manner. This way, you’ll stay on the right side of the law and avoid any serious issues.