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Work in Progress (WIP) accounting in Microsoft Dynamics 365 Business Central tracks the value of unfinished production orders. While a production order is open, all posted material and capacity costs sit on the WIP account in your chart of accounts. The amounts represent money tied up in production, not items you can count in inventory yet.
The value stays on the WIP account until you change the production order status to Finished. At that point, Business Central transfers the cost from the WIP account to your Manufactured Item inventory account automatically.
This automatic transfer only happens if you enable Automatic Cost Posting and Automatic Cost Adjustment in your Inventory Setup. If you leave these settings off, you must run the Adjust Cost Item Entries job and the Post Inventory Cost to G/L job manually to move the value.
How costs land on the Work In Progress account
When you post materials and capacities on a released production order, the cost accumulates on the WIP account. Take a released production order where you have already posted both materials and capacities. If you open the Production Order Statistics, you can see the actual cost on the order. In this example, the actual cost is 8,774.
That actual cost now sits on the Work In Progress account in your chart of accounts. If you leave the production order and look up the WIP account in the chart of accounts, you can see the balance. In this case the WIP account shows 8,700, while the Manufactured Item account holds a balance of almost 200,000.
Why WIP entries are always positive while the order is open
If you drill down into the WIP account, you may find more than one production order. An order that has already been finished, for example order 101144, shows a balance of zero, because the amount has been taken out of the WIP account.
For an open production order, all the entries on the WIP account are positive. This is because the value only represents money. You cannot count the items yet, even though they have been produced. You need to finish the production order before the value is taken out of the WIP account and transferred to the Manufactured Item account you have set up.
Finishing the production order moves the value to inventory
To move the value off WIP, change the status of the production order to Finished. When you change the status, the order can no longer be opened again. Business Central may warn you that some output is missing, and then it finishes the order.
Once the order is finished, the WIP account balance drops to zero, assuming it was the only open production order. The negative amount is transferred from the WIP account to the Manufactured Item account. The value is now on the actual inventory account instead of WIP.
Inventory Setup controls whether the transfer is automatic
The transfer from WIP to the Manufactured Item account happened automatically because of the Inventory Setup. In this setup, Automatic Cost Posting is enabled, and Automatic Cost Adjustment is set to always run.
If you do not enable these settings in the Inventory Setup, the transfer does not happen on its own. You then need to run two jobs manually, for example each month or whenever you need the figures updated:
- Adjust Cost Item Entries adjusts the item entry cost.
- Post Inventory Cost to G/L posts the adjusted cost to the general ledger.
Running these two jobs achieves the same result as the automatic setup.
Q&A
What does the Work In Progress account represent in Business Central?
It represents the value of materials and capacities posted on open production orders. The amount is money tied up in production, not countable inventory. Entries on the WIP account for an open order are always positive.
When does Business Central move costs off the WIP account?
When you change the production order status to Finished. The value is then transferred from the WIP account to the Manufactured Item inventory account, and the WIP balance for that order becomes zero.
Why did my WIP value transfer to inventory automatically?
Because Automatic Cost Posting and Automatic Cost Adjustment are enabled in your Inventory Setup. With these settings on, Business Central runs the cost adjustment and posting automatically when you finish the order.
How do I move costs from WIP to inventory if automatic posting is turned off?
Run the two jobs manually. First run Adjust Cost Item Entries to adjust the item entry cost, then run Post Inventory Cost to G/L to post it to the general ledger. These produce the same result as the automatic setup.
How do I check the actual cost of a production order?
Open the production order and go to Production Order Statistics. The actual cost shows the materials and capacities posted on the order, which is also the amount sitting on the WIP account while the order is open.