How to record work in progress

Before posting your work in progress journals, you must create the following nominal codes:

N/C	Description	Management Report	Category Type	Details
1002	Work in Progress	Balance Sheet	Current Assets	This is a balance sheet account and shows the current value of any work in progress. It is an asset account and would usually have a debit balance.
5210	Opening Work in Progress	Profit and Loss	Purchases	This is a profit and loss account. It holds the opening work in progress moved from the Work in Progress asset account at the start of the year. It should be a debit balance which remains the same all year.
5211	Closing Work in Progress	Profit and Loss	Purchases	This is a profit and loss account. From month two onwards, the monthly balance on this account is the work in progress at the start of the month less the work in progress value at the end of the month, which represents the movement in the value of the work in progress for the particular period.

1. Nominal codes > Nominal Record.
   
   

   Sage Accounts 2013 (v19) and 2014 (v20) - Modules > Nominal Ledger > Nominal Record.

   Sage Accounts 2012 (v18) and below - Modules > Nominal Ledger > Record.
   
   
2. Complete the Nominal Record as follows:
   
   

   N/C	Enter the nominal code you want to use. Note: For further information about nominal codes, please refer to the table above.
   Name	Enter the name of the account, for example, Work in Progress.

1. Save > Close.

You have created your new Work in Progress nominal codes. You should now check your Chart of Accounts to ensure that the new nominal codes are included within the correct section of the management reports. For further information about this, please refer to this guide.

At the start of your financial year you must move the value of your work in progress from the balance sheet Work in Progress nominal code, to the profit and loss Opening Work in Progress nominal code. At the end of month one the closing work in progress figure is posted to the balance sheet Work in Progress nominal code, and the profit and loss Closing Work in Progress nominal code.

At the start of month one

To move the value of work in progress from the balance sheet Work in Progress nominal code to the profit and loss Opening Work in Progress nominal code you need to post a journal entry.

NOTE: If you are just starting to trade and have no work in progress at the start of the financial year, please proceed to the following section.

EXAMPLE: In this example, the value of work in progress on the Balance Sheet report is £/€5,000.

1. Nominal codes > Journal entry.
   
   

   Sage Accounts 2013 (v19) and 2014 (v20) - Company > Tasks pane > Journal Entry.

   Sage Accounts 2012 (v18) and below - Company > Tasks pane > New Journal.
   
   
2. Enter a reference and date for the work in progress journal, then enter the relevant information into the Nominal Ledger Journals window, for example:

   NOTE: This journal is usually posted using date of the first day of month one.

   N/C	Name	Details	T/C	Debit	Credit
   1002	Work in Progress	Month 1 opening Work in Progress	T9		5000.00
   5210	Opening Work in Progress	Month 1 opening Work in Progress	T9	5000.00

   NOTE:  The non-vatable tax code, by default T9, should always be used when posting any opening or closing work in progress transactions. This ensures that the transactions do not appear on your VAT Return.

3. Save > Close.

You have now moved the value of the work in progress at the start of the month one from the balance sheet to the Opening Work in Progress on the profit and loss.

NOTE:  There are no further postings during the year to the Opening Work in Progress (5210) nominal code.

At the end of month one

At the end of month one the value of the closing work in progress for the month is posted to the balance sheet Work in Progress nominal code, and the profit and loss Closing Work in Progress nominal code. In this example, the value of work in progress at the end of month one is £/€3,000.

1. Nominal codes > Journal entry.
   
   

   Sage Accounts 2013 (v19) and 2014 (v20) - Company > Tasks pane > Journal Entry.

   Sage Accounts 2012 (v18) and below - Company > Tasks pane > New Journal.
   
   
2. Enter a reference and date for the work in progress journal, then enter the relevant information into the Nominal Ledger Journals window, for example:

   NOTE: This journal is usually posted using the date of the last day of month one.

   N/C	Name	Details	T/C	Debit	Credit
   1002	Work in Progress	Month 1 closing Work in Progress	T9	3000.00
   5211	Closing Work in Progress	Month 1 closing Work in Progress	T9		3000.00

   NOTE: Note: The non-vatable tax code, by default T9, should always be used when posting any opening or closing work in progress transactions. This ensures that the transactions do not appear on your VAT Return.

3. Save > Close.

You have now posted the value of the closing work in progress for month one to the balance sheet Work in Progress nominal code and the profit and loss Closing Work in Progress nominal code.

When you run the Profit and Loss report for month one, the cost of sales shows the movement of work in progress for the month as a £/€2,000 debit.

The postings for the second and subsequent months move the value of work in progress from the balance sheet to the profit and loss at the start of the month, and post the new closing work in progress figure to the balance sheet Work in Progress nominal code and the profit and loss Closing Work in Progress nominal code.

At the start of month two

To move the value of work in progress from the balance sheet Work in Progress nominal code to the profit and loss Closing Work in Progress nominal code you need to post a journal entry. In this example the value of work in progress on the balance sheet is £/€3,000, which is the figure posted to the balance sheet at the end of month one.

1. Nominal codes > Journal entry.
   
   

   Sage Accounts 2013 (v19) and 2014 (v20) - Company > Tasks pane > Journal Entry.

   Sage Accounts 2012 (v18) and below - Open the Company module, then from the Tasks menu choose New Journal.
   
   
2. Enter a reference and date for the work in progress journal, then enter the relevant information into the Nominal Ledger Journals window, for example:

   NOTE: This journal is usually posted using the date of the first day of the relevant month.

   N/C	Name	Details	T/C	Debit	Credit
   1002	Work in Progress	Month 2 opening Work in Progress	T9		3000.00
   5211	Closing Work in Progress	Month 2 opening Work in Progress	T9	3000.00

   NOTE: The non-vatable tax code, by default T9, should always be used when posting any opening or closing work in progress transactions. This ensures that the transactions do not appear on your VAT Return.

3. Save > Close.

You have now moved the value of the work in progress at the start of month two from the balance sheet current asset section to the Closing Work in Progress nominal code on the profit and loss.

At the end of month two

At the end of month two the value of the closing work in progress for the month is posted to the balance sheet Work in Progress nominal code and the profit and loss Closing Work in Progress nominal code. In this example the value of work in progress at the end of month two is £/€2,000.

1. Nominal codes > Journal entry.
   
   

   Sage Accounts 2013 (v19) and 2014 (v20) - Company > Tasks pane > Journal Entry.

   Sage Accounts 2012 (v18) and below - Open the Company module, then from the Tasks menu choose New Journal.
   
   
2. Enter a reference and date for the work in progress journal, then enter the relevant information into the Nominal Ledger Journals window, for example:

NOTE: This journal is usually posted using the last day of the relevant month.

N/C	Name	Details	T/C	Debit	Credit
1002	Work in Progress	Month 2 closing Work in Progress	T9	2000.00
5211	Closing Work in Progress	Month 2 closing Work in Progress	T9		2000.00

NOTE: The non-vatable tax code, by default T9, should always be used when posting any opening or closing Work in Progress transactions. This ensures that the transactions do not appear on your VAT Return.

1. Save > Close.

You have now posted the value of the closing work in progress for month two to the balance sheet Work in Progress nominal code and the profit and loss Closing Work in Progress nominal code.

NOTE: You do not need to post an additional journal at year end. The values on the Profit and Loss nominal codes are cleared down to the retained earnings nominal code.

When you run the Profit and Loss report for month two, the cost of sales shows the movement of work in progress for the month as a £/€1,000 debit.

The following example shows the two months trading as detailed earlier in this article. The cost of sales figures appear in the month to date column of the Profit and Loss report. At the start of the financial year the work in progress was valued at £/€5,000.00.

NOTE: The final cost of sales figure is also affected by any opening and closing stock journals you post.

Month One

The following journal was posted at the start of month one:

N/C	Name	T/C	Debit	Credit
1002	Work in Progress	T9		5000.00
5210	Opening Work in Progress	T9	5000.00

At the end of the first month the closing work in progress value was £/€3,000, and the following journal was posted:

N/C	Name	T/C	Debit	Credit
1002	Work in Progress	T9	3000.00
5211	Closing Work in Progress	T9		3000.00

For month one, the following apply:

• The opening work in progress figure is taken from the Opening Work in Progress nominal code, 5210.

• The closing work in progress figure is taken from the Closing Work in Progress nominal code, 5211.

• The purchases figure is taken from relevant nominal codes grouped together on the Profit and Loss report under purchases.
  
  The purchases for month one were £/€10,000.
  
  The cost of sales can then be calculated as follows:

COST OF SALES = OPENING Work in Progress plus PURCHASES less CLOSING Work in Progress.

COST OF SALES = 5,000 + 10,000 - 3,000.

Therefore cost of sales is equal to £/€12,000.

Month 2

The following journal was posted at the start of month two:

N/C	Name	T/C	Debit	Credit
1002	Work in Progress	T9		3000.00
5211	Closing Work in Progress	T9	3000.00

At the end of the first month the closing work in progress value was £/€2,000, and the following journal was posted:

N/C	Name	T/C	Debit	Credit
1002	Work in Progress	T9	2000.00
5211	Closing Work in Progress	T9		2000.00

For the second and subsequent months the following apply:

• The opening work in progress figure is taken as the debit value of the Closing Work in Progress nominal code, 5211, therefore equal to £/€3,000 for month two.

• The closing work in progress figure is taken as the credit value of the Closing Work in Progress nominal code, 5211, £/€2,000 for month two.

• The purchases figure is taken from relevant nominal codes grouped together on the Profit and Loss report under purchases.
  
  The purchases for the second month were £/€20,000.
  
  The cost of sales can then be calculated.
  
  COST OF SALES = OPENING Work in Progress + PURCHASES - CLOSING Work in Progress.
  
  COST OF SALES = 3,000 + 20,000 - 2,000.
  
  Therefore cost of sales is equal to £/€21,000.

By posting the opening and closing work in progress journals the true cost of sales is recorded on the Profit and Loss report rather than the value of purchases for the relevant month.