Question

You have been asked to provide an accurate and up-to-date profit and loss report on work in process for a particular job. What data might you draw on? What reports might you need to access? How would you ensure that the information you provide is error free and comprehensive

Answer 1

Work in process is shown as inventory under the head current assets. In order to evaluate the profit or loss from work in process we should consider the estimated cost for that particular work which has been assigned. At the date of entering the contract the estimated cost to be taken into consideration and the same to be compared with the actual cost inccured during periodic intervals. The relevant data required for ascertaining profit or loss on work in process includes the expenditure inccured till date for the particular job. Certain amounts to be continuously charged to work in process account like interest expense of loan taken to complete that particular job. Apart from that if any asset is being exclusively used for that particular job, the depreciation on that particular asset to be charged to work in process account. Also the operating and administrative expenses were also to be charges. Apart from all these the major expenditure is direct material and direct labour and overheads. The data for these items also to be considered. At the end of the year the total of work in process should be valued by various valuation techniques and arrive at the value of work in process