Costs for purchasing raw materials used in retail trade or for purchasing goods are historically kept on the "Stock" account instead of immediately recognizing them.
The idea behind this practice is that acquisitions are not yet being used for business, the sale of a higher value final product for a manufacturing or value-added retail business. Only when the finished products or retail goods are physically discharged and sold generates income for the business, taking into account their purchase costs (along with additional production costs), such as business. The use of accounting techniques serves two purposes:
– costs are not overvalued at the point when they are unearned
Even when this principle is straightforward, in the case of "things", it is a much more theoretical question of services or non-tangible assets that are marketed in the creative industry or even in any other service industry. And since the nature of traded value or services or non-material goods can be ideally defined in the basic contract, "Creating, Maintaining and Maintaining a Website" as a Service or "Delivering a Web Site as a Web Site Specified as a Short Description", their accounting approach creates a completely new, separate issue:
If the ad agency's "purchased" "is obliged to prepare a campaign for the client, how and when should the costs be recognized in the income statement? Ideally, and reporting the real profit for a campaign, costs will only be recognized when the campaign generates revenue for the agency. Here comes the "ongoing work" or "WIP" vehicle.
Pending work is used as a temporary vessel for collecting costs without recognizing costs as an expense for a business. Usually, as a tool-like asset (like the inventory bill), and the cost items held in this device are transferred to the cost of the sales invoices, the cost – possibly indicated – of service costs. Thus, ongoing work in the service environment allows you to account for unused costs in the same way as a warehouse or warehouse account for materials processing or manufacturing companies. Work in progress serves as a "theoretical warehouse" for non-material goods, for the purpose of achieving the same goal, inventory records for physical raw materials: calculate and report profits or losses on a business-affecting date
* see also regulatory explanations in the UK, Roger Zair "COMPUTER WORK IN PROGRESS" – Financial Week-June-2005