At the end of any financial period, certain goods in every manufacturing concern have been partially processed. As such, they are no longer raw materials. However, at the same time, they are not fully processed and cannot be called finished goods.
Such goods are called work-in-progress, unfinished goods, or work-in-process.
If the production cycle of a factory is relatively short, the value of work-in-progress at the end of the year may be small and can be safely ignored when preparing the manufacturing statement.
However, some large factories have long production cycles. At any given moment, the value of their work-in-progress may add up to a large amount. In these cases, work-in-process should be properly accounted for in the manufacturing statement.
It is important to note that the issue of recognizing work-in-progress arises twice in a financial year: once at the beginning and again at the end. There is generally no question of the purchase or sale of work-in-process.