WIP Posting GL Accounts

[dochong]

Can anyone explain to me why the WIP Production Costs are set up to Debit Inventory and the offseting transactions are set to Credit Cost of Goods Sold? This isn't making sense to me.

Also, why would Inventory Adjustments be posted to COGS and not to inventory?

thanks for your attention to this matter.


Paul Lynch,
CEO
InSync Technologies, LLC

 

[jready]

If you conduct a physical inventory and your count does not match what MAS90 has in its' system, an Inventory Adjustment is automatically posted as the offsetting adjustment to the increase or decrease in Inventory. Since it's inventory-related, the normal place to assign the Inventory Adjustment account is within the Cost of Goods Sold range.

As for WIP, the normal accounting process goes from Raw Materials -> WIP -> Finished Goods -> Cost of Goods Sold. A normal process, as Raw Materials are transformed (by adding Labor, for example) into Work-In-Process, you would:

DR Work-In-Process
CR Raw Materials
CR Payroll (depends on the company)


In your scenario, it appears that some type of raw materials are "expensed" when purchased, then the expense is reduced as the materials are transformed into WIP.

Caveat: I use MAS90 for Inventory, but not the Work Order module.

 

[dochong]

I understand the flow, but wouldn't it make more sense to post the WIP offset to inventory, as the Work Order should complete the Finished Goods to Inventory, then the Sales Order would credit Inventory and Debit COGS. It seems like we are bypassing the inventory accounts with this method.

thanks

Paul Lynch,
CEO
InSync Technologies, LLC

 

[jready]

Are SKUs in Inventory combined to make a new SKU? Example: SKU A = $100, SKU B = $50. They are combined to create SKU C. Thus:

DR WIP 150.00
DR WIP 75.00 (assumption)
CR Inventory/Finished Goods 150.00
CR Payroll Expense 75.00 (again, assumption)
To combine SKUs A & B

DR Inventory/Finished Goods 225.00
CR WIP 225.00
To record the creation of SKU C

I've been thinking about this...I wonder if the setup is backwards....