When our WIP posts, it places a debit in the work in process account on the balance sheet and a credit in WIP-clearing on the P&L (income statement). We do this because our jobs do not invoice until the job is completed, so WIP is used as a means to keep costs on the balance sheet until the job invoices so we're not seeing on the P&L the accumulated labor and materials for the jobs that are in process. When the job invoices, it is closed and WIP is released to the P&L. We also only calculate WIP once a month, at the end of the month, first booking the prior month's reversal, then booking the current month's WIP balances.
I have a job that opened in April 2020 and accumulated $35,000 in costs, but has not closed as of August 31st. In April, May, June, and July WIP calculated as $35,000, posting each end of the month and reversing on the first of the next month. Then in July an item adjustment was made to remove a $30,000 machine from the job, but it was done by going to the job ledger and entering a -1 for that item, with no cost associated. so now the item was gone, but the cost wasn't. When WIP calculated at the end of July, it only calculated $5,000, which tells me WIP takes the quantity and multiplies it by the cost for that part in the system. With that part gone from the job, I'd expect it to only calculate $5k in WIP. And that's what it did in July. But for some reason now in WIP is including that $30,000 part in the total again, even though it has not be re-added to the job. So what I'm seeing is:
April: 35000
May: 35000
June 35000
July 5000
August 35000
Does anyone know why WIP is doing this?
